Newsletter: Where Service Meets Reader Approval.
TMI Tax Updates - e-Newsletter
December 22, 2023
Case Laws in this Newsletter:
GST
Income Tax
Customs
Securities / SEBI
FEMA
PMLA
Service Tax
Central Excise
CST, VAT & Sales Tax
Indian Laws
Articles
News
Notifications
GST
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55/2023 - dated
20-12-2023
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CGST
Extension of due date for filing of return in FORM GSTR-3B for the month of November, 2023 for the persons registered in certain districts of Tamil Nadu.
GST - States
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53/2023-State Tax - dated
29-11-2023
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Gujarat SGST
Notify a special procedure for condonation of delay in filing of appeals against demand orders passed until 31st March, 2023.
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52/2023-State Tax - dated
4-11-2023
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Gujarat SGST
Gujarat Goods and Services Tax (Fourth Amendment) Rules, 2023
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1431/XI-2–23-9(47)-17-T.C. 245-U.P.Act-1-2017-Order (307)-2023 - dated
6-11-2023
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Uttar Pradesh SGST
Amendment in Notification No. KA.NI.-2-836/XI-9(47)/17-U.P.Act-1–2017-Order(06)-2017, dated June 30, 2017
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1430/XI-2–23-9(47)-17-T.C. 244-U.P. Act-1-2017-Order (306)-2023 - dated
6-11-2023
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Uttar Pradesh SGST
Amendment in Notification No. KA.NI.-2–848/XI-9(47)- 17-U.P. Act-1-2017-Order (15)-2017, dated June 30, 2017
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1426/XI-2–23-9(47)-17-T.C. 240-U.P. Act-1-2017-Order (305)-2023 - dated
6-11-2023
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Uttar Pradesh SGST
Amendment in Notification No. KA.NI.-2-842/XI-9(47)/17-U.P.Act-1-2017-Order-(09)-2017 dated June 30, 2017
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03/2023-C.T./GST - dated
18-12-2023
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West Bengal SGST
Seeks to notify w.e.f 01/12/2023 that Notification No.02/2023-C.T./GST dated 10/11/2023 is kept in abeyance till further notification
SEZ
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S.O. 5370 (E) - dated
15-12-2023
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SEZ
Central Government notifies the 85.047 hectares area at Shayampet Village, Geesugonda Mandal, Warangal District, in the State of Telangana and constitutes an Approval Committee
Circulars / Instructions / Orders
Highlights / Catch Notes
GST
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Validity of demand / show cause notice - Recovery of IGST - Jurisdiction of CAG to issue notices / SCN - Admittedly in the case in hand, the Form GST ASMT-10 was not issued to the petitioner. A contention has also been raised that the CAG is not the Proper Officer to issue any kind of letters regarding the discrepancy. - Operation of SCN stayed - HC
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Classification of goods - rate of GST - Stadiometer is diagnostic medical equipment and is covered under tariff item 90189019 (other category) with rate of tax being 12% - Infantometer is diagnostic medical equipment and is covered under tariff item 90189019 (other category) with rate of tax being 12%. - AAR
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Government Entity or not - Urban Improvement Trust (UIT) Kota - constructing a Community Hall by the applicant at Bapu Nagar Residential Scheme, Kota, in accordance of works contract allotted by UIT Kota - The applicant is liable to pay GST on supply of this services and there no exemption and deduction is available to applicant in respect of aforesaid service provided to UIT Kota. - AAR
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Time of supply - Stage of payment of GST - ln light of Section 12(6) of GST is to be paid on the date on which the supplier of goods receives such addition in value through interest on delayed payment of any consideration and a debit note may be issued in this regard under Section 34 of the Act. - AAR
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Manner of payment of pre-deposit - Blocking of Input Tax Credit - request of adjustment towards the pre-deposit under Section 107(6) to file an appeal came to be rejected by the Appellate-Authority - prayer for a direction to the Respondents to consider the deposit of Rs. 1 Crore as sufficient compliance of Section 107(6) of the CGST/MGST Act - Prayer allowed - HC
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Liability of GST - Whether purchase of raw cotton from Kacha Arhtiya who is a registered dealer constitutes a purchase from agriculturist? - The applicant is liable to pay GST under reverse charge basis being a registered person - AAR
Income Tax
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Exemption u/s 11(1)(d) - misutilization of receipts of earmarked funds as corpus donation - The fund was donated by founder member of the trust. The source is well explained. There is no deviation in activities of trust as per the stated main object. Expenses were incurred for charitable activities. The delay in project was due to stuck up of construction as per order of Hon’ble Jurisdictional High Court. In our considered view, there is no violation of section 11(1)(d) r.w.s. 11(1). - AT
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Jurisdiction of ACIT to complete assessment - Allocation of cases based on monetary limit - Prima facie it indicates that the assessment in the case of the assessee ought to have been framed by the Income-tax Officer and not by the ACIT as the income declared in the Income-tax return is less than Rs. 20 Lakhs. - AT
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Unexplained money u/s. 69A - AO rubbished the entire transaction by dismissing the gift as the same was not evidenced by a registered gift deed - By no stretch of imagination provisions of section 69A can be applied on such transactions as the credit is outcome of the sale of property. - AT
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Exemption from deduction of Tax u/s 194N and 194A to Co-operative Societies - The 1st respondent shall also consider with regard to the issuance of appropriate circulars for entertaining the cashless transactions by the Co-operative Societies by amending the IT Act. Once if the petitioners/Co-operative Societies have followed the above suggestions, there is no need for them to handle any cash transaction any more. - HC
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Limitation for passing fresh assessment order - Whichever regime we take into account, i.e., the time limit fixed as per Section 153(2)(A) of the Act or the time limit fixed by the amended provision i.e., Section 153(3) of the Act, as of today the AO is bereft of jurisdiction and hence, would have no legal locus to pass assessment order(s). Therefore, the prayers made in the writ petition are allowed. - HC
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Stay of demand during the pendency of the petitioner’s appeal before CIT (A) - The petitioner’s plea of financial stringency based on its balance-sheet also inspires no confidence as according to the Assessing Officer, the accounts have not been properly maintained. Accordingly, the writ petition is dismissed. - HC
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Applicability of section 56 on disputed property as purchased from relative - Additions u/s 56(2)(x) - since the assessee has purchased the land from the ‘relative’ and the said contention was duly supported by the genealogical tree, and the said fact has also already been examined by the AO, thus, in our considered opinion, the order of the Pr. CIT deserves to be quashed. - AT
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Cessation of liability u/s 41(1) addition was made u/s 68 - CIT(A) correctly adjudicated the issue by holding that mere removal of name of the lender from MCA would not absolve the assessee from the liability to repay the loan. CIT(A) rightly deleted the additions - AT
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TP adjustment commission on letter of credit - international transaction or not? - CIT (A) appreciated the difference between corporate guarantee and Letter of Comfort. AR further submits that there is a basic difference between corporate guarantee and Letter of Comfort. In a Letter of Comfort, the party issues only a letter that a subsidiary or group company would comply term of financial transaction and have no obligation to indemnify, however, in case of corporate guarantee, the party issuing guarantee is under obligation to the lender. - No additions - AT
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Deemed dividend u/s 2(22)(d) - Determination of accumulated profit - we are inclined to follow the accumulated loss declared by the Novateur India in their reinstated balance sheet as the proper accumulated loss based on the new set of accounting method and policies adopted by them and it is not mere comparative figures. Hence, the accumulated profit determined by the tax authorities are proper and the determination of dividend as per section 2(22)(d) is proper, accordingly sustain their findings - AT
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Taxability of Rental income earned from lease of building - AO and CIT(A) treated the rental receipts as income from business or profession and also directed to grant deprecation on the building - claim of deduction u/s 24(a) not allowed - AT
Indian Laws
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Non-Stamping of arbitration agreements - Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable - Non-stamping or inadequate stamping is a curable defect - An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists - SC
Service Tax
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Classification of service - cleaning activity or not - services relating to fumigation of export containers - he activity of fumigation of containers was not of commercial or industrial building or premises thereof. It would, therefore, not be covered by the definition of cleaning activity under section 65(24b) of the Finance Act. - AT
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Levy of service tax - declared service or not - Debit notes raised to offset the excess credit in the ledger account - Notice pay recovery - Cheque return penalty - Liquidated damages - Services of "agrees to an obligation to refrain from an act" or not? - None of the four demands can be sustained - AT
Central Excise
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100% EOU - refund of unutilized cenvat credit - Period of limitation of one year - the present appeal is under Rule 5 of the Cenvat Credit Rules, 2004 and hence the question of refund under Section 142 does not arise. Moreover, as per Section 142, any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse as seen from clause (3) of Section 142. - Appeal dismissed - AT
Case Laws:
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GST
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2023 (12) TMI 944
Cancellation of petitioner s GST registration with retrospective effect - failure to furnish the returns for a continuous period of six months - HELD THAT:- In the present case, the impugned order does not set out any intelligible reason for cancelling the petitioner s GST registration, let alone doing so with retrospective effect - it is also material to note that the learned counsel for the petitioner had confined his challenge to the cancellation of the petitioner s GST registration with retrospective effect. It is stated that the petitioner had no objection to his GST registration being cancelled but the same cannot be done with retrospective effect, as the same has a cascading effect on the petitioner s customers whom the supplies were made. The impugned order to the extent that it directs cancellation of the petitioner s registration with retrospective effect, is set aside - petitioner s GST registration shall stand cancelled from the date of the issuance of the Show Cause Notice, that is, with effect from 06.06.2023. Petition disposed off.
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2023 (12) TMI 943
Recovery of IGST - Validity of demand / show cause notice - Jurisdiction of CAG to issue notices / SCN - Conditions and procedure for issuance of SCN u/s 73(1) - HELD THAT:- Prior to issuance of a show cause notice under Section 73[1] of the CGST Act, 2017, it is mere discrepancy. At that stage, the alleged discrepancy would only be a discrepancy simplicitor but at the stage of issuance of Demand-cum-Show Cause Notice under Section 73[1] of the CGST Act, 2017, there is formation of a prima facie opinion on the part of the Proper Officer that there is an act, which is in violation of the statutory obligation cast on the noticee. Admittedly in the case in hand, the Form GST ASMT-10 was not issued to the petitioner. A contention has also been raised that the CAG is not the Proper Officer to issue any kind of letters regarding the discrepancy. This Court finds force in the contentions advanced by the petitioner that an act of issuance of the impugned Demand-cum-Show Cause Notice dated 05.09.2023 under Section 73[1] of the CGST Act, 2017 by the Proper Officer was without compliance of the mandatory conditions precedent, prescribed under the CGST Act, 2017 and the CGST Rules, 2017, more particularly, the provisions of Section 61 of the CGST Act, 2017 r/w Rule 99 of the CGST Rules, 2017, to derive jurisdiction to issue such a Demand-cum- Show Cause Notice under Section 73[1] of the CGST Act, 2017, impugned herein. Thus, it is ordered that the operation of the impugned Demand-cum-Show Cause Notice shall remain stayed, till the returnable date.
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2023 (12) TMI 942
Manner of payment of pre-deposit - Blocking of Input Tax Credit - request of adjustment towards the pre-deposit under Section 107(6) to file an appeal came to be rejected by the Appellate-Authority - prayer for a direction to the Respondents to consider the deposit of Rs. 1 Crore as sufficient compliance of Section 107(6) of the CGST/MGST Act - HELD THAT:- In the present case, the Petitioner is in no manner disputing that the Petitioner is required to comply with the provisions of sub-section (7) of Section 107 of the CGST Act, in filing the appeal. In other words, the Petitioner is ready and willing to make the payment/deposit of the tax as per clauses (a) and (b) of sub-section (6) of section 107 of the CGST Act. However, the question raised by the Petitioner is that for fulfilment of such condition, the amount of tax, which is voluntarily deposited by the Petitioner, under protest under sub-section (5) of section 73 of the CGST Act, by permitted to be reckoned for the purposes of a pre-deposit for compliance of sub-section (6) of section 107 of the CGST Act. In our opinion, such request for the Petitioner is not something, which is opposed to law, inasmuch as, on a holistic reading of section 73 of the CGST Act, it can be said that an amount deposited under sub-section (5) section 73 of the CGST Act is not an amount, which is deposited in pursuance of any demand or any assessment order. It is certainly a voluntary deposit and which is subject to all the contentions of the assessee. Thus, when it comes to the compliance of sub-section (6) of section 107 of the CGST Act, namely, the mandatory payment of the tax, being a condition precedent, mandated in terms of the provisions of subsections (6)(a) and (6)(b) of section 107 of the CGST Act, the principle as laid down in Supreme Court in VVF (India) Ltd. [ 2021 (12) TMI 477 - SUPREME COURT] would become applicable considering that the provisions of the CGST Act on pre-deposit are not too different from the provisions of the MVAT act, which fell for consideration of the Supreme Court. Blocking of input tax credit - HELD THAT:- The input tax credit is contended to have been blocked on 19th April 2022 and the period of one year expires on 19th April 2023, hence, by operation of law as per Section 83(2) of the CGST/MGST Act, the said attachment ceases to exists. The Respondents are directed to treat sum of Rs. 1 Crore as pre-deposit for the purpose of Section 107(6) of the CGST/MGST Act and the appeal be decided on merits - The input tax credit alleged to have been blocked vide order dated 19th April 2022 stands defreezed by operation of law - Petition disposed off.
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2023 (12) TMI 941
Maintainability of petition - availability of alternative remedy - Validity of assessment order - rejection of appeal on the ground of limitation - It is urged that the assessment order itself was an ex parte order - HELD THAT:- Having not availed the statutory remedies available, the petitioner cannot seek to approach this Court under Article 226 of the Constitution of India to challenge an assessment order especially with respect to the computation of the turn over and the determination of the taxable turnover and the tax payable, as arrived at by the Assessing Officer. In the BGST Act, an appellate remedy is provided under Section 107, which has to be availed within a period of three months or with a delay within a further period of one month. It is trite law that when there is a specific period for delay condonation provided, there cannot be any extension of the said period by the Appellate Authority or by this Court under Article 226 of the Constitution. The petitioner by his own failure has not availed the appellate remedy and in that circumstance, there can be no invocation of the extraordinary jurisdiction under Article 226 of the Constitution of India - there is no jurisdictional error, violation of principles of natural justice or abuse of process of Court averred or argued by the petitioner in the above writ petition. The gross delay also stands against the petitioner. Petition dismissed.
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2023 (12) TMI 940
Classification of goods - rate of GST - Stadiometer being diagnostic medical equipment - Infantometer being diagnostic medical equipment - taxable at 12% GST Slab? - HELD THAT:- Infantometer as the name suggests, is used for purpose of measuring height/length of infants. As per Wiktionary definition, Infantometer is an instrument for measuring the size of young children. The product is described as useful for research, clinical and hospital purpose - Stadiometer is described as piece of medical equipment used for measuring human height. It is used in routine medical examination and for clinical tests and experiments - The above definitions make it clear that both these instruments, the Stadiometer and the Infantometer have clinical used and are described as diagnostic instruments and apparatus. Stadiometer is diagnostic medical equipment and is covered under tariff item 90189019 (other category) with rate of tax being 12% - Infantometer is diagnostic medical equipment and is covered under tariff item 90189019 (other category) with rate of tax being 12%.
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2023 (12) TMI 939
Liability of GST - Whether Purchase of raw cotton from Kacha Arhtiya who is a registered dealer constitutes a purchase from agriculturist - Reverse Charge Mechanism in view of section 9(3) of CGST/PGST Act, 2017 - HELD THAT:- To understand whether the Kacha Arhtia is liable to pay GST under reverse charge basis, it is pertinent to go through the Circular No. 57/31/2018-GST issued vide CBEC-20/16/4/2018-GST dated 4th September, 2018(to be read with the corrigendum dated 05th November, 2018) which has explained the Scope of Principal-Agent relationship in the context of Schedule-I of the CGST Act - As clarified vide above circular, the crucial component for covering a person within the ambit of the term 'agent', as contained in sub-Section (5) of Section 2 of the CGST Act and PGST Act, 2017, is corresponding to the representative character identified in the definition of agent under the Indian Contract Act, 1872. The said circular further clarifies that a key ingredient for determining whether the agent is wearing the representative hat and is supplying or receiving goods on behalf of the principal would be whether invoice for further supply or goods on behalf of the principal is being issued by the agent or not. Since the scope of supply under the GST Act also covers the activities specified in schedule-I by or undertaken through an agent, the key ingredient for determining relationship would be whether the invoice for the further supply of goods on behalf of the principal is being issued by agent or not. In other words, the crucial point is whether or not the agent has the authority to pass on the title of the goods on behalf of the principal. As soon as the auction for a lot is over, the auctioneer (Market officer) shall fill in the particulars in a book to be maintained in Form-H and shall secure the signatures of both the buyer and the seller or their respective representatives, whoever may be present at the spot. H register will have all details of date, Kacha Arhtia, name and address of seller, description of produce, quantity, rate, name of buyer. The responsibility of paying the market fee as prescribed under APMC Act and Rules shall be of the buyer in terms of provision of APMC Act and Rules and M/s Bansal Industries being a buyer in instant case, is liable to pay such fee and not the Kacha Arhtia or Agriculturist. Delivery of agricultural produce is made only after the Kacha Arhtia or the buyer gives to the seller a sale voucher in Form J clearly mentioning the details of the buyer and other details of the produce. On delivery of agricultural produce to a buyer, the Kacha Arhtia executes a memorandum in Form-I and delivers the same to the buyer on the same day or the following day clearly mentioning the name of the buyer corresponding to the Form-J issued to the seller. Kacha Arhtia does not fall under the Scenario 4 given in the CBIC Circular No. 57/31/2018-GST dated 04.09.2018 cited by M/s Bansal Industries in their supports as at no time during the process of sale-purchase of agricultural goods in the grain markets does the Kacha Arhtia have the authority to pass or receive the title of the goods on behalf of the agriculturist. At all times during the purchase of raw cotton at the Mandi, the title of the agricultural produce and the authority to pass on the title of the agricultural produce is vested exclusively with the agriculturist himself. During the auction, it is the agriculturist who has to agree to the price offered by the bidders and thereafter when the delivery of goods is to be made to the successful bidder, i.e. buyer, at that point also the consent of the agriculturist is required before the goods can be transported to the buyer's premises - the provisions of APMC Rules also provide an opportunity to the buyer to remit money to the seller either directly or via the Kacha Arhtia. It is in fact only as an option of convenience wherein the money is transmitted via Kacha Arhtia after deduction of their commission etc which is the regular market practice. M/s Bansal Industries i.e. the applicant is the recipient of supply of goods(raw cotton) by an agriculturist and not the Kacha Arhtia. As such, the applicant is liable to pay GST under reverse charge basis being a registered person in terms of Notification No. 13/2017- Central Tax (Rate) dated 28th June 2017 as amended vide Notification No. 43/2017-Central Tax (Rate) dated 14th November 2017 read with corresponding Notifications issued under Punjab State GST Act 2017.
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2023 (12) TMI 938
Government Entity or not - Urban Improvement Trust (UIT) Kota - constructing a Community Hall by the applicant at Bapu Nagar Residential Scheme, Kota, in accordance of works contract allotted by UIT Kota - taxability under GST law - paid tax shall be refunded to the assessee along with appropriate interest or not - Applicability of change in tax rate during continuing of a works contract, where the works contract has pre-fixed terms and conditions including total tender rate. Whether Urban Improvement Trust (UIT) Kota is Government Entity ? - HELD THAT:- UIT Kota is established by Govt, of Rajasthan (State Legislature) in 1970 under The Rajasthan Urban improvement Act 1959 and it is established by Govt, of Rajasthan with 90% or more participation by way of equity or control to carry out a function entrusted by the State Government. Thus UIT Kota falls under the category of Government Entity . Whether constructing a Community Hall by the applicant at Bapu Nagar Residential Scheme, Kota, in accordance of works contract allotted by UIT Kota, is a taxable service under GST law and if yes, then determination of the liability to pay tax after applicable exemption and deductions? - HELD THAT:- The applicant is liable to pay GST on supply of this services and there no exemption and deduction is available to applicant in respect of aforesaid service provided to UIT Kota. If no, then whether the paid tax shall be refunded to the assessee along with appropriate interest? - HELD THAT:- This question need not be answered. Applicability of change in tax rate during continuing of a works contract, where the works contract has pre-fixed terms and conditions including total tender rate - HELD THAT:- The benefit of the reduced tax rate, i.e., 12% instead of 18% on works contract supplied to a Governmental Authority or a Government Entity regarding the works contract services mentioned in the corresponding entry, stands discontinued with effect from 01.01.2022. The revised rate applicable for the said supply is 18%. The revised rate is applicable from the 01st day of January, 2022. In case, where the time of supply of the work completed is on or before 31st December, 2021, GST at pre-revised rate is applicable and in case where the time of supply of the work completed is on or after, 01st day of January, 2022, GST at the revised rate is applicable.
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2023 (12) TMI 937
Stage of payment of GST - Time of supply - delayed payment of interest that is not still paid by purchaser of goods - time of demand of interest/debit of interest in the account of purchaser of goods - Requirement to issue fresh invoice of interest for delayed payment be issued in spite of non-receipt of interest? - GST payable on accrual basis or not? HELD THAT:-As per Section 15 of CGST Act, 2017, 'The value of a supply of goods or services or both shall be the transaction value, which is the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply Further, as per Section 15(2) of CSGT Act, 2017, lists out the compulsory inclusions in the value of supply wherein as per Section 15(2)(d) it has been clarified that - 'interest or late fee or penalty for delayed payment of any consideration for any supply', thus GST provisions have clearly outlined Interest will be a part of value of supply. Sec. 12(6) The time of supply to the extent it relates to an addition in the value of supply by way of interest, late fee or penalty for delayed payment of any consideration shall be the date on which the supplier receives such addition in value - Further applicant may raise debit note for interest on delayed payment under Section 34 of Act. GST on interest recovered is to be paid on the date on which the supplier of goods receives such addition in value on delayed payment of any consideration.
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Income Tax
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2023 (12) TMI 936
Exemption from deduction of Tax u/s 194N and 194A to Co-operative Societies - petitioner had taken a stand that they are business correspondents to pass on the cash benefits as mandated by the State Government and hence, they are qualified for being exempted under Section 194N - DR contented that Central government had also increased the limit of Rs. 1 crore as determined in the provisions of Section 194N of the IT Act to a sum of Rs. 3 Crore, and the same had came into force with effect from 01.04.2023 only with an intention to grant benefits to the members of the Co-operative Societies HELD THAT:- The activities of the Co-operative Societies, such as accepting the deposits, paying the interest and thereafter redeeming the same for granting loan to agriculturists, weavers or to it's members, are appears to be partly as a banking activities, however, the active involvement of the petitioners/cooperative societies, to act as a business correspondents of a State Government for the distribution of the cash benefits to its members as well as to the non-members such as Pongal enam, flood relief, Covid reliefs and other reliefs, would appears that it is not a banking transaction but a transaction other than the banking activities in nature. As far as the application of Section 194A of the IT Act is concerned, the petitioners are liable to deduct the TDS as provided thereunder. Whenever the deposits or investments are made with the societies, the societies are liable to deduct the tax on the interest payment. The eligibility for deduction must be tested by the Authorities in the course of assessment as it involves the determination of several questions of fact. The society is always entitled to, in the return of income filed by it, seek credit of the taxes attributable to the income returned by it and any excess deduction, if the stand of the societies is accepted in assessment, would have to be refunded to them. Therefore, it would be a premature petition to challenge the circular issued by the Authority concerned. In the present case, the petitioners/Co-operative Societies have challenged the three circulars dated 16.03.2021, 05.08.2021 and 01.04.2021 issued by the 3rd respondent. The said circulars mandate the compliance of provisions of Sections 194A and 194N of the IT Act and in those circulars, the 3rd respondent had not mentioned anything contrary to the provisions of Sections 194A and 194N of the IT Act. Merely, they had brought into the knowledge of the petitioners/Societies to comply with the said provisions along with the latest amendments thereunder. At any cost, the same cannot be challenged under Article 226 of the Constitution of India, unless and otherwise, the provisions of Sections 194A and 194N of the IT Act are struck down with regard to the Cooperative Societies are concerned. This Court had came across many cases, where the officers of the cooperative societies viz., Secretary or other Officials, in collusion with other officers, had opened hundreds of fictitious accounts and granted loans to those fictitious accounts. Thereafter, if there is any loan waiver or interest waiver granted by the Government, the same benefits will goes to the persons, who are all involved in the creation of those fictitious accounts. Hence, this is where the Societies are functioning in an unregulated manner. It is also due to the reason that the qualified Auditors had not been mandated to audit the accounts of the Societies and only the departmental audits have been conducted, which would pave the way for all sort of malpractices in those cooperative societies. Under these circumstances, Section 194N of the IT Act would be one of the ways to curb the malpractices in distribution of cash and encourage the cashless economy. Now-a-days, the Central Government is granting benefits to the poor people through their bank accounts. Hence, if it is possible for the land-less people to open their bank accounts, certainly, the petitioners/Co-operative Societies cannot plead any excuse that its members, who are all having lands, are not in a position to open the bank accounts since it is very easy process to open the bank account for anyone at present. If any distribution of cash for reliefs such as Pongal enam, flood relief, covid relief, etc., the same can be rooted through the respective bank accounts directly, whereby unnecessarily the members need not approach the Co-operative Societies for claiming the said reliefs. On the other hand, it will be automatically credited to their respective bank accounts and message, intimating the said deposit, will also be sent to their phones. In such case, the valuable time of the farmers and other members of the societies will be saved and the work of the cooperative society will also get reduced. This Court is inclined to suggest and pass the following orders: (i) Any benefit, such as pongal enam, flood reliefs, etc., shall be made only through the bank accounts of the respective members or non-members of the Co-operative Societies. The said act will save the valuable time of the members of the said Societies since if they are called for the payment of cash, initially they have to approach the Society or ration shop, etc., to register their name along with the address and thereafter, again they have to approach the Society or ration shop, etc., to collect the money, which would unnecessarily cause hardship for the members as well as the general public. On the other hand, if the funds are transferred to the respective bank accounts of the beneficiaries, it would be hassle-free for the public and there will be no question of mishandling of any cash; (ii) If there is payment of cash for all the benefits provided by Government, such as pongal enam, flood reliefs, etc., it would only encourage and pave way for the mishandling of money and the same will also lead to the misappropriation of money and corruption at a large extent. When a way is available to completely eradicate the corruption and mishandling of money, etc., necessarily the Government/Societies, etc., should follow the same and distribute all sorts of reliefs through their bank accounts, in which case, the question of TDS would not arise. (iii) When the reliefs are credited to the respective bank accounts of the beneficiaries, the withdrawal of the same should be allowed only in the presence of the beneficiaries in person. At any cost, the officials of the cooperative societies/ration shops, etc., should not be allowed for withdrawal of the said reliefs by bringing the cheques from its members. If it is allowed, there are chances for malpractices and mishandling of cash hereagain. (iv) In a similar way, if any loan is granted to the members of the societies, the said loan has to be directly credited to the respective bank accounts of the members, in which case, the withdrawal should be permitted only in the presence of respective members of the cooperative society since there is a chance for collecting of cheques by the Societies from its members and withdrawing the loan amount under the guise of helping the poor farmers, which again lead to mishandling of money. Hence, the same should not be allowed. The aforesaid aspects has to be ensured by the respective banks and Co-operative Societies and other Government Agencies, who are involved in the distribution of cash to public. (v) Further, this Court would suggest to consider and make a provision to audit the Co-operative Societies through the Chartered Accountant in addition to the present method of scrutinising the records by the Auditors. (vi) The 1st respondent shall also consider with regard to the issuance of appropriate circulars for entertaining the cashless transactions by the Co-operative Societies by amending the IT Act. Once if the petitioners/Co-operative Societies have followed the above suggestions, there is no need for them to handle any cash transaction any more. The above order would also avoid the distribution of reliefs in the fictitious name, since the same will happen very often at the cooperative societies, due to which, a large number of cases were also filed against the officials of the cooperative society and pending before the Courts. WP disposed of.
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2023 (12) TMI 935
Limitation for passing fresh assessment order - Whether assessment orders pursuant to the appellate orders of the Tribunal are barred by limitation in terms of section 153? - principal reason petitioner has approached this court is that since limitation under Section 153(2)(A)/153(3) had expired pursuant to the orders passed by Tribunal AO had been emasculated of the jurisdiction to pass a fresh assessment order - HELD THAT:- The counter-affidavit filed on behalf of the respondents/revenue, does not indicate the dates of which add of the orders dated 21.11.2014 and 29.05.2015 passed by the Tribunal were served on the petitioner. As would be evident, the best scenario for the respondents/revenue would be if the order of the Tribunal was served on or after 01.04.2016, but on or before 31.05.2016. It is not in dispute that as per Section 153(2)(A) [which is the old provision], the limitation would expire on 31.03.2018. However, if the amended provision, i.e., Section 153(3) of the Act were to be taken into account, the limitation would expire on 31.03.2017. It is also not disputed that this aspect of the matter is covered by the judgments of the coordinate bench rendered in Nokia India (P.) Ltd. [ 2017 (9) TMI 1298 - DELHI HIGH COURT] and Aricent Technologies (Holdings) Ltd [ 2023 (3) TMI 220 - DELHI HIGH COURT] . Thus, whichever regime we take into account, i.e., the time limit fixed as per Section 153(2)(A) of the Act or the time limit fixed by the amended provision i.e., Section 153(3) of the Act, as of today the AO is bereft of jurisdiction and hence, would have no legal locus to pass assessment order(s). Therefore, the prayers made in the writ petition are allowed. Assessment proceedings concerning AY 1998-99 to AY 2009-10, pursuant to the orders of the Tribunal dated 21.11.2014 and 29.05.2015, have become time-barred. AO is thus directed to accept the return income lodged by the petitioner for the aforementioned AYs. Resultantly, the return as available on record will be processed and consequential orders would be passed.
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2023 (12) TMI 934
Income taxable in India - 15 percent of the revenue generated from the bookings made within India were attributable to the Permanent Establishment (PE) - HELD THAT:- The coordinate bench, in AY 2006-07 [ 2022 (9) TMI 311 - DELHI HIGH COURT] , had sustained the said conclusion and had gone on to hold that no substantial question of law arose for its consideration. It is this decision that was affirmed by the Supreme Court, with the dismissal of the SLP as noted hereinabove. Tribunal via the impugned order, did not rule on the merits of the case for AYs 2007-08 to 2010-11. Revenue, in the instant appeals, has not proposed a question on merits, perhaps, having regard to the aforementioned judgment of the Supreme Court as well as the decision of the Tribunal on the narrow issue of limitation. Tribunal, in the instant case, had dismissed the appeal of the appellant/revenue on the ground of limitation for the AYs in issue, i.e., AYs 2008-09 and 2010-11.The reason given by the Tribunal for dismissal, on merits, was that the final assessment order was barred by limitation, as per Section 153 of the Income-tax Act Appellant s/revenue s plea that the provisions of Section 144C of the Act would come into play was repelled by the Tribunal for the reason that framing a draft assessment order was not required for the periods in issue, and therefore, the non-obstante clause under Section 144C of the Act would not override Section 153 of the Act. Since on merits the matter stands closed, in our view, these appeals need not be entertained vis- -vis the questions proposed by the appellant/revenue as they have, in a sense, been rendered academic.
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2023 (12) TMI 933
Stay of demand during the pendency of the petitioner s appeal before CIT (A) - petitioner states that the discretion to stay the demand during the pendency of an appeal has to be exercised judiciously and reasonably, based on relevant grounds, with due application of mind, and must not be exercised arbitrarily or capriciously or based on irrelevant considerations - He contends that doubting of genuineness of the transaction is based on considerations alien to Section 68 for which the Assessee is only required to show legitimate receipt of the money from the claimed person through normal banking channels, which has been undisputedly proven by the petitioner - HELD THAT:- Undoubtedly, the power vested u/s 220(6) of the Act, 1961 is discretionary and it is not mandatory to pre-deposit 20% of the assessed amount to obtain stay of deposit at the stage of filing the appeal before the CIT (Appeals). In the present case, AO in the assessment order has given a number of cogent findings against the petitioner. In fact, the AO after analyzing a number of relevant facts has virtually held that the transaction between the petitioner and the foreign entity was based on reverse engineering . Keeping in view the aforesaid findings, this Court is of the view that the petitioner has not been able to make out a prima facie case in its favour. To put it mildly, the petitioner has a lot to answer in the appeal. The petitioner s plea of financial stringency based on its balance-sheet also inspires no confidence as according to the Assessing Officer, the accounts have not been properly maintained. Accordingly, the writ petition is dismissed. However, this Court clarifies that the findings given by this Court are only in the context of the present writ proceedings and shall not prejudice either of the parties at the stage of the appellate proceedings.
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2023 (12) TMI 932
Exemption u/s 11(1)(d) - misutilization of receipts of earmarked funds as corpus donation - assessee-trust had taken loan- from bank for purchasing land from UIT but had repaid loan interest by utilising the donation amount but not for construction of hospitals - HELD THAT:- The foreign donation was received as a corpus donation and within the meaning of section 11(1)(d). The fund was duly delayed for delay in approval from FCRA, where it is mentioned that the funds is for construction/running of hospital/dispensary and clinic . The assessee had utilized this donation for repayment of loan which is not at all violation section 11(1)(d) and duly covered with consent of the donor. Further the donor agreed to donate amount to Rs. 20 crores to the assessee in next two years for carrying out the activities of the assessee trust in Udaipur. The donor, Dr. Kirti Jain has also submitted the letter for the purpose of donation on dated 06.01.2014. The fund was donated by founder member of the trust. The source is well explained. There is no deviation in activities of trust as per the stated main object. Expenses were incurred for charitable activities. The delay in project was due to stuck up of construction as per order of Hon ble Jurisdictional High Court. In our considered view, there is no violation of section 11(1)(d) r.w.s. 11(1). We find that there is no valid reason to interfere in the impugned appeal order. Therefore, the ground nos. 1, 2 3 of the revenue are dismissed.
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2023 (12) TMI 931
Revision u/s 263 - Applicability of section 56 on disputed property as purchased from relative - Whether disputed property is purchased from relative therefore, the provision to section 56(2)(x) with explanation 56(2)(vii) is not applicable under the facts of the case, more over it not a capital asset being a rural agriculture land? - HELD THAT:- It was the case of the assessee that the AO has specifically raised query regarding the said issue and it has been explained to the AO by the assessee that the land, which was purchased by the assessee, is purely a rural agricultural land situated more than 6 km. from Nagar Palika, Damoh as per the population is between 1,00,000 to 10,00,000 and the seller Mohd. Khalil alias Khalik is a relative of the assessee and in support of the above contention, a confirmation letter from the seller has also been furnished. AO accepted the said contention/clarification given by the assessee and made no addition. In our considered opinion, the said approach of the AO requires any interference u/s 263 of the Act. Increase in unsecured loan during the assessment year under consideration, the assessee had furnished 41 lenders from unsecured loans which has been taken during the year under consideration - The assessee had also furnished the bank statement of the lenders. Learned counsel for the assessee contended that the assessee had passed the three tests i.e. identity of the lenders, creditworthiness of the lenders and genuineness of the transactions, except the case of Ganga Jamuna Traders of Rs. 60,00,000/- and all the transactions are being made through bank account. The learned Assessing Officer accepted the clarification which was supported by the documentary evidence given by the assessee and made no addition. The assessee had complied and answered all the queries raised by the Assessing Officer u/s 143(2) and 142(1) of the Act by submitting satisfactory details and clarifications in respect of both the issues i.e. purchase value of the property less than the value as per stamp authority and large increase in unsecured loan during the year . Considering the fact that the assessee has discharged his initial onus by providing the supporting evidence such as confirmation, PAN Adhar Numbers of all 41 lenders and the Bank statements, the burden of the assessee is discharged which has been accepted by the A.O. Further in so far as second issue is concerned, since the assessee has purchased the land from the relative and the said contention was duly supported by the genealogical tree, and the said fact has also already been examined by the AO, thus, in our considered opinion, the order of the Pr. CIT deserves to be quashed. Accordingly, we allow the grounds of appeal of the assessee and set aside the order impugned of the Pr. CIT - Appeal of the assessee is allowed.
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2023 (12) TMI 930
Jurisdiction of ACIT to complete assessment - Allocation of cases based on monetary limit - Issuance of notice u/s 143(2) by non jurisdictional AO - Addition u/s 68 - HELD THAT:- The assessee being a corporate assessee and located in a mofussil area and the income of the assessee being less than Rs. 20 Lakhs, the jurisdiction for assessing the income of the assessee vested with the Income-tax Officer. However, the assessment order in the case of assessee has been framed by the ACIT, Circle-38, Midnapore. In absence of any specific order u/s 127 of the Act, further giving powers to the prescriber authorities for transferring of the case, prima facie it indicates that the assessment in the case of the assessee ought to have been framed by the Income-tax Officer and not by the ACIT as the income declared in the Income-tax return is less than Rs. 20 Lakhs. As relying on Deepak Kedia [ 2023 (12) TMI 895 - ITAT KOLKATA] indicates that issuance of notice u/s 143(2) of the Act by the Assessing Officer not having jurisdiction over the assessee renders the assessment proceedings as a nullity. However, the case of the assessee before us is on a much stronger footing because leaving aside the issuance of notice u/s 143(2) of the Act, even the final assessment order has been framed by the Assessing Officer not having jurisdiction over the assessee. We allow the additional ground raised by the assessee and hold that the assessment order framed in the case of the assessee for AY 2013-14 dt. 26/03/2016 is without jurisdiction and is a nullity and is hereby quashed as the AO framing the said assessment did not have jurisdiction over the assessee as mandated in the CBDT Instruction No. 1/2011 - Decided in favour of assessee.
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2023 (12) TMI 929
Addition u/s 68 - unsecured loans raised by the assessee from nine different entities - non-appearance by the lenders in response to summons - As per AO assessee has failed to produce these parties despite specifically called upon to do so by issuing various communications by the AO - HELD THAT:- Undisputedly the assessee has raised loans from eight parties aggregating to Rs. 3,95,00,000/-. As per the direction of the ld. AO, the assessee filed all the necessary evidences comprising addresses, names, PANs, Bank statements, loan confirmations, details of Directors, financials of the lenders etc. Besides we note that the notices issued under section 133(6) of the Act to all lenders were also responded by the parties confirming the transactions by filing the necessary evidences. In our opinion the failure of the loan creditors to make personal appearance is not a ground to hold that the transactions were not genuine and/or the creditworthiness of the loan creditors was not proved. We have also examined the documents filed before us and find that these companies had sources to advance the money to the assessee. We take note of the DR argument that no interest has been given on these loans, which has been controverted by the ld. A.R. by placing necessary evidences before the Bench, which showed that interest has been given and TDS has duly been deducted therefrom. We also observe that these loans were repaid in the subsequent years. We observe that the assessee had submitted the documents required to establish the genuineness of the transactions and in respect of creditworthiness submitted the copies of income tax return and their financial statements etc. AO has not brought any adverse finding based on such documents filed by the assessee. We are of the considered view that the order passed by the ld. CIT(Appeals) is well reasoned order which has been passed after taking into account all the aspects of the matter. Moreover, mere non-appearance by the lenders in response to summons would not make these transactions as non-genuine as has been held by the Hon ble Apex Court in the case of CIT Vs Orissa Corporation Pvt. Limited [ 1986 (3) TMI 3 - SUPREME COURT] As decided in Rohini Builders [ 2001 (3) TMI 9 - GUJARAT HIGH COURT] phraseology of section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this, case the legislative mandate is not in terms of the words shall be charged to income-tax as the income of the assessee of that previous year . The Supreme Court while interpreting similar phraseology used in section 69 has held that in creating the legal fiction the phraseology employs the word may and not shall . Thus the un satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as held by the Supreme Court in the case of CIT v. Smt. P. K. Noorjahan [ 1997 (1) TMI 6 - SUPREME COURT] - Decided against revenue. Cessation of liability u/s 41(1) addition was made u/s 68 - HELD THAT:- As we find that loan taken from M/S Knavsukh Trading Pvt. Ltd in the earlier year has been added u/s 68 of the Act which was rightly deleted by the ld CIT(A) on the ground that loan was not taken in the current year. We also note that the said lender s name was struck off from MSC and AO simplicitor held that liability on account of loan has ceased but CIT(A) correctly adjudicated the issue by holding that mere removal of name of the lender from MCA would not absolve the assessee from the liability to repay the loan. It was also held by CIT(A) that provisions of section 41(1) were not applicable to the instant case. Considering these facts and circumstances we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue. Addition of interest paid on the unsecured loans - Since we have already allowed the appeal of the assessee by holding that the unsecured loans were genuine and therefore consequentially, the interest paid on the said unsecured loans during the year is also allowable. Decided in favour of assesee.
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2023 (12) TMI 928
Issuance of assessment order without DIN - violation of CBDT Circular No.19/2019 requiring mandatory DIN - scope of subsequent issue of DIN - HELD THAT:- Issuance of assessment order without DIN as it is a matter of record that the impugned assessment order neither contain any DIN and nor any reason for non-mentioning of DIN thereof. Rather, we are in complete agreement with the above contentions of the assessee. In our view, the subsequent communication issued by the Ld. AO generating DIN for the impugned assessment order cannot make good the deficiency in the assessment order issued without generating DIN. In taking this view we are supported by the ratio decidendi of the decision of Hon ble Delhi High Court in CIT (International Taxation) vs. Brandix Mauritius Holdings [ 2023 (4) TMI 579 - DELHI HIGH COURT] - Thus we are inclined to quash the assessment order passed by the Ld. AO under section 153C/143(3) of the Act. Decided in favour of assessee.
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2023 (12) TMI 927
Disallowance u/s 14A - CIT (A) has made enhancement of disallowance u/s 14A after applying Rule 8D - HELD THAT:- As undisputed fact that Rule 8D is not applicable in A.Y.2007-08, as it has come into the statute in A.Y.2008-09 and now it is a settled issue that computation of disallowance under Rule 8D cannot be made prior to the A.Y.2008-09. This Tribunal in A.Y. 2005-06 has restricted the disallowance under Section 14A 5% of the exempt income - assessee submitted the calculation of investments after reducing foreign investment and non-dividend yielding investment and other investments as per working given by him which has also been provided at page 101 of the paper book and has submitted that, based on this, the average of opening and closing of investment worked out and disallowance should be reduced substantially. However, his working is based on formula provided in Rule 8D (2)(iii), but once Rule 8D is not applicable in this year then we are not inclined to work out disallowance as Rule 8D. Thus, in line with the earlier decisions of the Tribunal, we hold that 5% of exempt income will be taken as disallowance for the purpose of Section 14A and accordingly, assessee gets part-relief. Disallowance of expenditure incurred on settlement claims - HELD THAT:- This issue is squarely covered by the decision of the Tribunal in assessee s own case for A.Y. 2005-06 [ 2020 (3) TMI 799 - ITAT MUMBAI] wherein disallowance in respect of settlement of claims have been allowed. Decided in favour of assessee. TP adjustment commission on letter of credit - international transaction or not? - AO has made addition in respect of non-recovery by the assessee from its AE and the issue of letter of credit holding that assessee has not charged any commission from the AE - HELD THAT:- We find that the Tribunal in A.Y.2005-06 [ 2020 (3) TMI 799 - ITAT MUMBAI] has decided this issue in favour of the assessee stating CIT(A) after appreciating the contention of assessee concluded that issuance of Letter of Comfort does not constitute an international transaction. CIT (A) appreciated the difference between corporate guarantee and Letter of Comfort. AR further submits that there is a basic difference between corporate guarantee and Letter of Comfort. In a Letter of Comfort, the party issues only a letter that a subsidiary or group company would comply term of financial transaction and have no obligation to indemnify, however, in case of corporate guarantee, the party issuing guarantee is under obligation to the lender. AR further submits that in fact this ground of appeal is also covered by the decision of Tribunal in case of The India Hotel Company Ltd [ 2019 (9) TMI 1340 - ITAT MUMBAI] wherein similar ground of appeal was considered and by following the decision of earlier years in that assessee and decision of Hon'ble Karnataka High Court in United Braveries Holding Ltd. Karnataka State Industrial Investment and Development Corporation Ltd. [ 2011 (8) TMI 1331 - KARNATAKA HIGH COURT] wherein it was held that Letter of Comfort merely indicates the parties assurance that respondent would comply with the term of financial transaction without guaranteeing performance in the event of default. Since in the earlier year this precise issue has been decided in favour of the assessee, therefore, as precedence, following the aforesaid decision, we uphold the order of the ld. CIT (A) and consequently grounds raised by the Revenue are dismissed.
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2023 (12) TMI 926
Validity of reopening of assessment - Reason to believe - reopening beyond four years - assessee has not deducted TDS on interest payment - HELD THAT:- We noted that as the AO has not recorded in its reasons for reopening of assessment that there is any failure on the part of the assessee to disclose any material fact necessary for completion of assessment in the relevant assessment year, despite the fact that original assessment was completed u/s. 143(3) of the Act and time period of 4 years has expired from the end of the assessment year before reopening of assessment u/s. 147 r.w.s. 148 of the Act, we find no infirmity in the order of CIT(A) quashing the reopening. we are of the view that reopening is beyond 4 years and as the original assessment was framed u/s. 143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose any material facts necessary for its assessment, the reopening in present case is bad in law. Decided against revenue.
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2023 (12) TMI 925
Unexplained money u/s. 69A - AO rubbished the entire transaction by dismissing the gift as the same was not evidenced by a registered gift deed - AO came to the conclusion that no portion of the property at Rani Jhansi Chowk, Delhi has been transferred to the assessee by way of gift, therefore, the assessee could not have sold and earned long term capital gains, therefore, the amount credited in her bank account was treated as income of the assessee u/s. 69A - HELD THAT:- It is true that the impugned property was purchased by the husband of the assessee and 1/3rd share in the said property was subsequently gifted by him to the assessee. No doubt the gift deed was not registered but the same cannot be rubbished as the sham transaction since the assessee was in full possession of the said property which was subsequently sold by her by way of a registered sale deed for a consideration of Rs. 12.50 crores which was credited to her bank account held with HDFC Bank. By no stretch of imagination provisions of section 69A can be applied on such transactions as the credit is outcome of the sale of property. It is not a case of the revenue that the assessee has introduced her own unaccounted money by depositing the same in her bank account in the garb of sale of some immovable property. Decided against revenue.
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2023 (12) TMI 924
Deduction u/s 80P(2)(d) - interest received by the appellant from Baroda Gramin Bank Ltd. is not allowable deduction as this entity is not a cooperative society as provided u/s 80P(2)(d) - assessee is a registered cooperative society under the Rajasthan Cooperative Societies Act and engaged in the business of trading in milk and other milk products - HELD THAT:- In the present case, the appellant is a co-operative society whose primary object is to provide financial accommodation to its members who are all other cooperative societies and not member of the public. Thus, the interest received by the appellant from Baroda Rajasthan Gramin Bank Ltd, a Regional Rural Bank and not a co-operative bank would not be allowable deduction u/s 80P(2)(d) of the Act as this entity is not a cooperative society as provided u/s 80P(2)(d) of the Act in the light of the latest judgment of the Apex Court in the case of Kerala State Co-Operative Agricultural Rural Development Bank Ltd. v [ 2023 (9) TMI 761 - SUPREME COURT] However, addition of interest received by the appellant from Central Cooperative Bank is held to rightly deleted by the CIT(A). Thus, addition made in the assessment order in respect of the interest received by the appellant from Baroda Rajasthan Gramin Bank Ltd., a Regional Rural Bank which is not a cooperative bank would be liable to be sustained. We accept the grievance of the revenue as genuine in respect of the addition on account of interest received by the appellant from Baroda Rajasthan Gramin Bank Ltd and as such, it is sustained. Appeal of the Revenue is partly allowed.
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2023 (12) TMI 923
Validity of notice issued u/s 143(2) - validity of the assessment order in absence of any effective order passed u/s 127 - HELD THAT:- We notice that the present issues are covered against the assessee in view of the Hon ble Supreme Court judgment in the case of Kalinga Institute of Industrial Technology [ 2023 (6) TMI 1076 - SC ORDER ] wherein as held that when assessee had participated pursuance to the notice issued u/s 142(1) and had not questioned the jurisdiction of the assessing officer as per section 124(3)(a) of the I.T. Act precludes the assessee from questioning the jurisdiction of the assessing officer. While going through the present facts of the case and issue involved, we find that assessee has never raised any question before the AO challenging the jurisdiction of AO within 30 days of receipt of notice u/s 142(1) of the Act as well as transfer of jurisdiction u/s 127 of the Act. In such circumstances both the grounds taken by the assessee has no merit, therefore, the grounds taken by the assessee are hereby dismissed. Applicability of section 43CA - valuation of impugned sold out units as determined by the AO in terms of value determined by the stamp duty authority - whether agreement of sale was entered prior to applicability of the provision itself by the Finance Act, 2013 w.e.f. A.Y. 2014-15? - HELD THAT:- When the impugned order was passed by the ld. CIT(A) did not consider the DVO s report as available with him while passing the impugned order, we feel it necessary to remand back the instant issue to the file of AO with the direction to reconsider the valuation report furnished by DVO by applying proposition of law as laid down in the case of Maria Fernandes Cheryl vs ITO [ 2021 (1) TMI 620 - ITAT MUMBAI ] and also considering the documents as well as necessary submission made by the assessee before him and it is also directed that while doing so the ld. AO should give opportunity of being heard to the assessee. In terms of above, the instant issue is hereby allowed for statistical purposes. DVO s report in the case of assessee was furnished beyond the limitation period as prescribed under the law, therefore, the DVO s report cannot be considered for the purpose of assessing the income of the assessee - While going through the impugned order, we notice that DVO s report was never taking into consideration for the purpose of assessing the income of the assessee by the authority below and while going to the facts and circumstances of the case, we find that present issue involved in this appeal is similar to the decision [supra] would apply mutantis mutandis. Accordingly, we set aside the matter to the file of AO with a direction to decide the issue afresh. Both the appeals of the assessee are hereby allowed for statistical purposes.
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2023 (12) TMI 922
Deemed dividend u/s 2(22)(d) - Determination of accumulated profit - capital gains arising pursuant to capital reduction by the Indian company - migration from IGAAP to Ind-AS - opening balance as on 01.04.2016 for computation of the accumulated profit / (losses) as on date of capital reduction should be considered as per the amount taken up in accordance with the Indian Accounting Standard - AO recomputing the accumulated profit as against the actual accumulated loss of Novateur as on the date of capital reduction - whether treating the capital gains as dividend, the AO/ DRP erred in recomputing the accumulated profit as against the actual accumulated loss of Novateur as on the date of capital reduction? - HELD THAT:- The financial statement prepared and approved by the share holders prior to Ind-AS are based on policies and method of accounting adopted by the assessee's. As per the new Ind-AS, general accepted policies and method in line with the global acceptance are being adopted to present the financials of the company. In order to achieve the transition, Ind-AS 101 was introduced to facilitate the companies to prepare the first balance sheet. This requires the companies to prepare the current (FY 2016-17) and previous year (FY 2015-16) balance sheet by adopting the new and accepted policies and method proposed in the Ind-AS. The argument that the figures reinstated is only comparative purpose is not proper considering the fact that the reinstated figures are based on the new accounting method and new policies as per the Ind-AS, which the company proposes to follow consistently in the future. Reinstated figures are not for past performance but for the future adoption of the policies. The reinstated figures are the actual status and financial position of the company based on the accepted new method of accounting proposed in the Ind-AS. The balance sheet adopted by the share holders as on 31.03.2016 are based on the previous set of accounting method as per Indian GAAP and when the company adopts the new accounting standards as per Ind AS, the assets and liabilities in the balance sheet will certainly change. The changes in the assets and liabilities are reflected in the reinstatement of figures declared by the company in the current financial year. The argument put forth by the assessee cannot be accepted. The figure declared by the assessee in the balance sheet in the retained earning opening balance sheet is the actual accumulated loss carried forward by the company Novateur India based on the adoption of new accounting policies. Hence, Ground Nos.1 and 2 are dismissed. Assessment proceedings of Novateur India, the assessing officer has accepted the submissions of the company and it amounts to acceptance of the department that the figures declared by them are proper and same has to adopted in the case of the assessee - Both the assessments are independent and if there is any financial impact, we could consider the same in both the assessments. Merely because the AO has collected the information and not discussed anything in the assessment order, we cannot presume his acceptance. Therefore, we are inclined to follow the accumulated loss declared by the Novateur India in their reinstated balance sheet as the proper accumulated loss based on the new set of accounting method and policies adopted by them and it is not mere comparative figures. Hence, the accumulated profit determined by the tax authorities are proper and the determination of dividend as per section 2(22)(d) is proper, accordingly sustain their findings. Exemption u/s 10(34) denied (which is available if the income is in the nature of dividend referred to in the section 115-O of the Act) - exemption was denied on the premise that Novateur India has not paid Dividend Distribution Tax (DDT) and that dividend on account of capital reduction does not fall u/s. 115O - Whether exemption under section 10(34) would be applicable only for the amount, which has suffered tax under section 115-O? - HELD THAT:- We observe from the record that the claim of the assessee that the deemed dividend u/s 2(22)(d) is also eligible to claim exemption u/s.10(34) of the Act- since the provisions of the section 115-O does cover the definition of dividend except specifically as mentioned in the proviso to section 115Q of the Act. In Smt. Kayan Jamshid Pandole case [ 2018 (11) TMI 1340 - BOMBAY HIGH COURT] gave the decision in favour of the assessee considering the fact the share holder should not suffer on the failure of the company, the revenue can recover from the company with the other specific provisions for recovery. The ratio of the decision clearly shows that the individual share holders should not suffer because of gross failure on the part of the company. We observe the fact in the present case is distinguishable to the fact in the above case. In the present case, the assessee is a holding company holding majority shares (By B Ticino SPA Holding company and the assessee holding 99.999%) in the Novateur India. Basically, the management of the Novateur India is controlled by them and the failure of the Novateur India to pay additional tax in the form of DDT is nothing but failure of the assessee itself. They cannot claim the benefit both sides. In the case of Smt Kayan Jamshbid Pandole (supra), the group of individual share holders does not have any control over the company whereas in the given case, the situation is different. One hand, we cannot hold the Novateur India as defaulter and other hand, we cannot allow the same management to take the advantage of benefit u/s 10(34) of the Act for the failure of the same management. It is fact on record that Novateur India has not paid any DDT on the dividend, hence the benefit u/s. 10(34) cannot be claimed even though the definition of dividend u/s.2(22)(d) is covered u/s 115O of the Act. Assessee has received the gross dividend including DDT. In the normal case, the company will deduct DDT at the applicable rate and remit the net dividend. Therefore, as per the provisions of section 10(34) r.w.s. 115O the dividend received by the shareholders are exempt. In this case, the assessee has received gross dividend. The option available to the assessee is two-fold, considering the fact that same management is responsible to deduct DDT. Either they should remit the DDT to the Novateur India and Novateur India will remit the DDT and thus assessee can claim exemption or other option is to pay the applicable tax under DTAA on the Gross dividend received by them which has lower rate of taxation. Therefore, we are inclined to reject the factual submissions of the assessee and accordingly, the plea raised by the assessee in the Ground No 3 is rejected. MFN Clause - Whether if the alleged dividend is taxed in the hands of the assessee, the applicable tax rate should be considered as 5% in view of the Most Favoured Nation or MFN Clause of the tax treaty (read with the protocol to the Tax Treaty)? - HELD THAT:- Where tax has been levied at source at excess under the provisions of Article 10 to 12, applications for refund of the same have to be lodged with the competent authority of the state which levied the tax within a period of three years after the expiration of the calendar year in which the tax has been levied. In this case, the tax under DTAA rates were levied by the Assessing Officer. Now the assessee takes the plea that in case the dividend income is chargeable to tax then the applicable rate would be based on the MFN clause, which is lesser than the applicable treaty rate. As discussed in this case, Assessing Officer has levied the applicable tax, the period of claiming the excess tax has already elapsed. Therefore, in this case, the assessee cannot claim any benefit under treaty or under MFN clause. Therefore, we are not inclined to entertain the claim of the assessee at this stage based on the above discussion. Accordingly, the ground raised by the assessee is dismissed even though they relied on the decision of Hon ble High Court, in our view, the issue raised is time barred and even the CBDT has raised circular objecting to unilateral implementation of protocol by the Netherland. Unless it is notified by the Indian government under section 90(2) of the Act. Accordingly, Ground No. 4 is dismissed. Capital gain claimed as not taxable in India as per the para 5 of Article 13 of the Tax Treaty - HELD THAT:- Capital reduction by way of an order of the NCLT cannot be reckoned as alienation of shares in the course of corporate organization, re-organization, amalgamation, division or similar transaction. What has been canvassed before us is that, the first exception is only applicable if the alienation takes place to the resident of that other state i.e. India, if it is sold to a resident of India, i.e., other than NOVATEUR INDIA. Such a plea in our opinion cannot be accepted, because exception for taxability of capital gains in the state of resident which has been carved out, clearly envisages that if alienation of shares are more than 10% of the Indian company and such an alienation takes place to an Indian resident, then resident based taxation cannot be applied if the Netherland company had more than 10% interest in the Indian Company. Undisputedly, the alienation took place to resident of India and therefore, it cannot be held that only if some other Indian company or Indian resident could have bought shares, then only this exception would apply is too farfetched understanding of the Para No. 5. In any case, the alienation of shares is by way of capital reduction and in lieu of such capital reduction where Indian company has paid consideration for alienation of such shares which it has bought back and had paid a compensation, is nothing but a consideration of transfer of shares and therefore, it tantamount to gain on alienation of shares taxable under the head 'capital gain' in India. As stated above, second exception is not applicable. Contention of the assessee before us is that it falls under the first limb which categorically provides that in case of alienation of shares, resident country had right to tax the capital gain i.e. Netherland - Though under Article 13(5), it is a resident based taxation, however, if the exception has been carved out if the threshold of alienation of shares which forms part of 10% interest in the capital stock of Indian Company is present, then resident based taxation is shifted to source based taxation and the source country i.e. India has right to tax under DTAA. Accordingly, this ground raised by the assessee is dismissed. AO computed surcharge and cess on the rate of tax for dividend (ie, 10%) provided in the tax treaty in the computation sheet to final assessment order - HELD THAT:- As relying on SUNIL V. MOTIANI [ 2013 (12) TMI 1105 - ITAT MUMBAI] we direct the Assessing Officer to follow the ratio as laid down in the above judgment, accordingly, we direct the Assessing Officer to levy only the applicable rate of tax as per the treaty without additional surcharge or cess since the applicable tax is inclusive of surcharge and education cess. Accordingly, this ground of appeal is allowed.
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2023 (12) TMI 921
Rental income earned from lease of building - Denial of deduction claimed u/s 24(a) - income from other sources or Business and profession instead of House Property - As argued CIT(A) has not classified the stand of granting depreciation which will only enhance the deduction in favour of the appellant - HELD THAT:- DR submitted that while dismissing the grounds of assessee the ld. CIT(A) has followed order of ITAT Delhi [ 2017 (5) TMI 1102 - ITAT DELHI] AY 2008-09 2009-10 respectively wherein the Tribunal held that the rental income earned by the assessee from lease of building would be taxable under the head income from business and profession and the AO was also directed to grant depreciation on the capital asset/building while computing the income from business. On being asked by the bench the ld. counsel of assessee, in all fairness, submitted that the issue has been decided against the assessee by the Tribunal. Since the ld. CIT(A) followed order of the Tribunal for AY 2008-09 2009-10 while upholding the action of the Assessing Officer treating the rental receipts as income from business or profession and also directed to grant deprecation on the building. Therefore we are unable to see any valid reason to interfere with the findings recorded by the ld. CIT(A) on this issue based on order of Tribunal in assessee s own appeals - Decided against assessee. Addition u/s 40(a)(ia) - cost of sales as covered by the provision of section 194C(6) 194C(7) - HELD THAT:- As we note that the Hon'ble Delhi High Court in the case of CIT Vs. Ansal Land Mark Township (1) Pvt. Ltd [ 2015 (9) TMI 79 - DELHI HIGH COURT] has taken the view that the insertion of the second proviso to Sec.40(a)(ia) of the Act is retrospective and will apply from 1.4.2005. Once it is held that the Assessee is entitled to the benefit of 2nd proviso to Sec.40(a)(ia) of the Act, the CIT(A) ought to have directed the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. To the extent the recipients from the Assessee have so included the sum in their returns of income and filed the same, no disallowance u/s.40(a)(ia) of the Act ought to have been sustained by the CIT(A). CIT(A) ought to have also directed the AO that in case the recipient parties are not cooperating in providing details, the AO should call for the information u/s. 133(6) or 131 of the Act, for verification of the same. We therefore set aside the order of the CIT(A) to the extent to which he had sustained the order of the AO on the disallowance u/s.40(a)(ia) of the Act and remand the issue to the file of the AO to verify whether the recipients have included the receipts paid by the assessee in their respective returns of income and also paid taxes on the same. Accordingly, ground of assessee is allowed for statistical purposes. Allowable business expenditure - expenditure incurred on foreign travel by the employees and partners - HELD THAT:- Addition has been upheld by observing that since the assessee failed to prove the business expediency of foreign trip to Europe therefore the primary onus has not been discharged by the appellant either during the assessment or during appellate proceedings. CIT(A) also rightly concluded that the appellant has failed to prove that these expenses identified by the Assessing Officer, were incurred wholly and exclusively for the business purpose of assessee. We are unable to see any valid reason to interfere with the findings recorded by the ld. CIT(A) as the submissions of assessee does not hold merits. Accordingly, ground of assessee is dismissed upholding the addition. Addition u/s 68 - capital contribution to the assessee firm by a partner - HELD THAT:- From the order of ITAT Delhi Bench in the case of Alliance Engineers and Construction [ 2019 (2) TMI 2095 - ITAT DELHI] is relevant to note that wherein the Tribunal held that when a partner introduces the money/capital in the firm either in the shape of capital or loan to the partnership firm, addition, if any, can be made only in the hands of partner and not in the hands of partnership firm as long as the partner confirms to have invested towards capital or as loan to the firm. In the present case the assessee has filed documents but we are unable to see any confirmation from the contributing partner confirming the capital contribution to the firm. The Assessing Officer and the ld. CIT(A) has noted detailed findings while confirming the addition u/s. 68 of the Act but they have not show cause the assessee to file relevant documentary evidence including confirmation etc. substantiating the claim of capital contribution. Therefore in our consider view the assessee should be allowed to explain his case before the Assessing Officer with the support of all relevant material, documentary evidence etc. Hence the issue of capital contribution by the partner is restored to the file of the Assessing Officer for readjudication of issue after allowing due opportunity of hearing to the assessee.
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Customs
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2023 (12) TMI 920
Smuggling - Betel Nuts - Violation of order dated 31 March 2017 passed by the Authority for Advance Rulings (AAR) under the Chapter V B of the Customs Act, 1962 (the Act) containing Sections 28E to 28M. The only contention raised by the respondents is that because of change in law on account of dismissal of appeal by the Supreme Court against the order passed by CESTAT in case of other assessees, advance ruling is not binding. HELD THAT:- It is a well settled in law that the assessee can invoke writ jurisdiction under Article 226 of the Constitution of India, despite an alternate statutory remedy of an appeal interalia on the ground that there is a breach of fundamental rights, breach of natural justice, order passed is without jurisdiction or there is a challenge to the vires of the statute. In these circumstances, the Court can exercise writ jurisdiction inspite of appeal remedy being available to the petitioner. The decision of the CESTAT, Chennai Bench in case of S.T. Enterprises [ 2021 (3) TMI 27 - CESTAT CHENNAI] and Ayush Business Overseas [ 2021 (3) TMI 1285 - SC ORDER] certainly cannot be a binding precedent on High Court nor can it be binding on all the authorities/assessees throughout the country. The decision of the Chennai Bench of CESTAT is binding interse between the parties before the Tribunal and not the petitioner or the authorities having jurisdiction over the petitioner. The dismissal by the Supreme Court without going into merits of the case acts only as res judicata between the parties before the Court and same cannot be said that CESTAT bench decision amounts to a declaration of law. Therefore dismissal of appeal by the assessees before the Chennai Bench of CESTAT, by the Supreme Court does not attract provisions of Section 28 J(2) of the Act for not following decision of the advance ruling rendered in the petitioner s own case. In the instant case, the respondents have passed the O-I-O contrary to the provisions of Section 28J of the Act and, therefore, the same is without jurisdiction. In view of the above discussion that the impugned order is passed without jurisdiction, writ petition is maintainable. The petitioner hence ought not to be relegated to take recourse to an appellate remedy. The impugned O-I-O dated 11th November 2022 is hereby quashed and set aside - Petition allowed.
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2023 (12) TMI 919
Prayer for direction upon the respondent customs authority concerned to pay to the petitioner value of goods in question as on the date of seizure - seizure was on the ground of foreign origin and that it was smuggled in nature - HELD THAT:- Considering the facts and circumstances of the case and submission of the parties and in view of the order of the appellate authority dated 1st March, 2021 holding that the adjudication order confiscating the goods in question and imposition of penalty not sustainable in law, action of respondents customs authority neither returning the seized goods in question to the petitioner nor paying the value of goods as on the date of the seizure is arbitrary and illegal and accordingly the respondent customs authority concerned is directed to pay to the petitioner the value of goods in question as on the date of seizure within a period of four weeks from the date of communication of this order. Petition disposed off.
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2023 (12) TMI 918
Provisional release of goods - Valuation of goods - applicability of N/N. 5/2023 which imposes minimum cap of Rs. 50/- per kg. for import of Apples - HELD THAT:- The petitioner is entitled to provisional release of goods as prayed for for more than one reason. Notification No. 5/2023 which imposes minimum price of Rs. 50/- per kg for import of apples has been stayed by the Kerala High Court. Secondly, only issue is with respect of valuation and goods being perishable in nature and further the petitioner is willing to comply with the terms and conditions to be put forth by respondent no. 2 for provisional assessment of goods there does not seem to be justifiable release to detain the goods. In the light of these facts, it would be in the interest of justice that the petition be allowed. The Respondents are directed to provisionally assess the Bill of Entry No. 8733339 within a period of four days from today and release the goods on the petitioner furnishing the bond - petition disposed off.
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2023 (12) TMI 917
Maintainability of appeal - non-prosecution of the case - HELD THAT:- There are no justification for adjourning the matter beyond three times which is the maximum number statutorily provided. The Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.
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2023 (12) TMI 916
Provisional release of the seized goods - appellants were availing exemption from payment of customs duty on import of Gold bars under Advance Authorisation Scheme - HELD THAT:- From the perusal of the legal provisions of the Customs Act, 1962, it transpires that the proper officer under Section 110(1) ibid, if he has reason to believe that any goods are liable to confiscation, then he may seize the goods. In terms of sub-section (2) to Section 110 ibid, a Show Cause Notice (SCN) in respect of the seized goods is required to be given within a period of 6 months to the person from whose position the goods were seized. For any reasons to be recorded in writing, such period of 6 months may be extended to another 6 months time by competent authority specified therein. It is also provided that this time limit does not apply in cases where the goods have already been released to the goods. However, CBIC in its instructions No.1/2017-Customs dated 08.02.3017 had required that the field formations shall adhere to the time limits prescribed under Section 110(2) ibid, irrespective of the fact that whether goods remain seized or are provisionally released. For cases to be adjudicated within the competence of Principal Commissioner/ Commissioner of Customs or an Addl./ Joint Commissioner of Customs, one year from the date of service of the SCN has been fixed as the outer time limit; for the authorities below, namely Asst./Dy. Commissioners and other gazetted officers, the time limits have been fixed as 6 months and 3 months, respectively. Further, in cases where such time limits could not be adhered to by an adjudicating authority, due to circumstances that prevented from observing that time limits, then the supervisory officer has been asked to fix appropriate timeframe for disposal and monitoring of such cases. On analysis of the legal provisions contained in Section 110 (A) ibid, and in view of the development in the pending show-cause proceedings before the Commissioner of Customs- IV (Export), the appeal for provisional release of goods has become infructuous on account of final orders having been passed on the show cause notices issued in respect of such seizure of goods. The appeal filed by the appellants has become infructuous inasmuch as the SCNs issued by the department had already been adjudicated. Hence, the present appeal filed before the Tribunal for unconditional release of the seized goods cannot be considered - appeal dismissed.
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Securities / SEBI
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2023 (12) TMI 915
Determination of jurisdiction of High Court for SEBI violations - Violation of SEBI s minimum public shareholding norms and violation of SEBI s minimum public shareholding norms - Separate and independent settlement applications were also filed by respondent nos. 2 to 8 - Whether this court is the appropriate forum for deciding the present writ petitions and granting the reliefs as prayed for? - HELD THAT:- A perusal of Clause 2 of Article 226 indicates that the writ jurisdiction can be exercised by the High Court primarily in relation to the territories within which the cause of action, wholly or in part arises. However, the location of such Government or authority or residence of such person, outside the territories of the High Court will not deter the High Court from issuing the appropriate writ. The introduction of Clause (2) in Article 226 of the Constitution of India widened the width of the area for issuance of writs by different High Courts, however, the same cannot be construed to completely dilute the original intent of the Constitution makers which is succinctly encapsulated in Clause (1) of Article 226. Rather, Clause (2) is an enabling provision, which supplements Clause (1) to empower the High Courts to ensure an effective enforcement of fundamental rights or any other legal right. Therefore, the power of judicial review cannot be circumscribed by the location of the authority against whom the writ is issued, however, the same does not mean that the constitutional mandate enshrined under Article 226 (1) can be completely neglected or whittled down. The cause of action means a bundle of facts, which is necessary for the plaintiff to prove in order to succeed in the proceedings. It does not completely depend upon the character of the relief prayed for by the plaintiff. It is rather the foundation upon which the plaintiff lays his/her claim before the court to arrive at a conclusion in his/her favour. It depends on the right which the plaintiff has and its infraction. Section 20 of the Civil Procedure Code, 1908, provides a generic definition of the term cause of action to mean fact, which is necessary to establish to support a right to obtain a judgment. The question whether cause of action has arisen within the territorial jurisdiction of a court, has to be answered based on the facts and circumstances of the case. The cause of action, thus, does not comprise of all the pleaded facts; rather it has to be determined on the basis of the integral, essential and material facts which have a nexus with the lis. It is also a settled proposition of the law that the location where the tribunal/appellate authority/revisional authority is situated would not be the sole consideration to determine the situs of the accrual of cause of action, ignoring the concept of forum conveniens in toto. Hence, even if a small part of the cause of action is established, and the same is found to be non-integral or non-material to the lis, the court may invoke the doctrine of forum non-conveniens and decline to exercise its writ jurisdiction, if an alternative, more efficacious forum for the same exists. It is, thus, unequivocally clear that the petitioners participated before SEBI s Internal Committee on different dates at Mumbai and thereupon, a settlement had arrived at. It is, thus, seen that it is not merely the location of the respondent-SEBI s Head Office at Mumbai, but rather the entire genesis of the dispute lies in Mumbai itself. The settlement was finalized at Mumbai. The determination of the settlement not being fulfilled was made at Mumbai. The consideration to that effect has taken place at Mumbai and the decision to revoke the settlement has also been passed at Mumbai only. Merely because some of the writ petitions were entertained by this court relating to certain violations of norms and regulations of respondent-SEBI by the respondent companies therein and issues arising out of consequential settlement application, that in itself would not determine the integral, essential and material part of the cause of action as the pendency of the writ petition before this court has no relation with the impugned revocation order which has taken place subsequent to the said writ petition. The law relating to the doctrine of forum conveniens, as discussed above, already makes it explicitly clear that the jurisdiction has to be determined on the facts and circumstances of each case. With respect to the averment that this court is the most convenient forum for the petitioners, it would be inappropriate and myopic to assume that while determining the jurisdiction, only the convenience of the aggrieved party approaching the court has to be looked into. In fact, with the advent of technology in contemporary times, the courts have transcended the geographical barriers and are now accessible from remote corners of the country. Therefore, the convenience of the parties cannot be the sole criterion for the determination of jurisdiction considering the broader perspective of dynamism of technology and increased access to justice. The determination of cause of action and territorial jurisdiction has to be in line with the constitutional scheme envisaged under Article 226 of the Constitution of India. Moreover, the litigation history of the present writ petitions reveals that the parties have, in fact, agitated their concerns before the Hon ble High Court of Judicature at Bombay. Nothing has been put before this court, that shall allow the conclusion of the Hon ble High Court of Judicature at Bombay being a non-convenient forum. The forum, in the considered opinion of this court, is available, convenient, as also approachable. In all fairness, the petitioners herein ought to have disclosed the said fact before the Hon ble High Court of Bombay regarding reserving the right to challenge the settlement order. Undoubtedly, they can challenge the same without prior intimation to the Hon ble High Court of Bombay, but the recourse must have been taken before an appropriate forum/court. The burden of a fair demeanour on the part of litigants considerably amplifies when they approach the courts under the extraordinary jurisdiction. Therefore, at times, it is the constitutional courts upon which falls the burden to prevent the abuse of jurisdiction and eliminate any susceptibility of forum shopping. It is, thus, seen that under the facts of the instant matters, the integral, essential and material part of the cause of action had arisen with the territorial jurisdiction of the Hon ble High Court of Judicature at Bombay and even assuming that a slender part of cause of action has arisen within the jurisdiction of this court, applying the principles of forum conveniens as has been held by the Hon ble Supreme Court in the case of State of Goa [ 2023 (3) TMI 683 - SUPREME COURT] , this court does not deem it appropriate to entertain the instant writ petitions. The instant writ petitions are, therefore, dismissed.
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FEMA
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2023 (12) TMI 914
Adjudication made under FEMA Act - Non issuance of show cause notice as well as non giving of an opportunity of being heard within the meaning of Section 16 of the Act r/w Rule 4(1) and 4(3) of the Rules certainly would amount to violation of principles of natural justice - HELD THAT:- The mode of service of notice has been clearly demonstrated at Rule 14, i.e., 3 methods, namely 14(a), 14(b) and 14(c). At least Rule 14(b) and 14(c), the notices have been served on these noticees in their last known address or the address where they carried on business last. Merely because at the time of serving the notice, these noticees were not available at the address at Bengaluru would not ipso facto entile them to claim immunity that the notices served on them at the Bengaluru address cannot be construed as a notice within the meaning of Section 16 r/w Rule 4(1) and Rule 14(b) or (c) of the Rules. Therefore, this Court have no hesitation to hold that, notice as contemplated under the Act as well as the Rules as discussed herein above have been served on these noticees. Under Section 42(1), if a person committing a contravention who is a company, every person who at the time of contravention was committed was incharge of and was responsible to the company for the conduct of the business of the company as well as the company, shall be deemed to be guilty of the contravention and shall be liable to be proceed against and punished accordingly. Insofar as the application of Section 42(1) against these noticees are concerned, it was the vehement contention of Mr.Shah, that the two Noticee namely Noticee No.17 and 20 were the nominee Directors, i.e., Non-executive Directors of the first Noticee company on behalf of the fourth Noticee company. When their very appointment as a Director itself is a mere nominee on behalf of the fourth noticee company as a Non-Executive Directors, therefore they are not incharge of and was responsible to the conduct of the business of the company as well as the company. Therefore assuming that, any contravention that has been made by the first Noticee company, for which these noticees namely Noticee No.17 and 20 cannot be found fault with. Therefore u/s 42(1) no contravention cannot be attributable against these Noticees. Insofar as this contention of the learned counsel appearing for the petitioners are concerned, whether they were the Non-Executive Directors or nominee Directors and during the relevant point of time whether they were in the helm of affairs or the company or not, whether the contravention that has been made by the first Noticee company would amount to the contraventions of the persons like Noticee No.17 and 20 also, for which, they are also to be proceeded against and be punished by imposing penalty or not, are all the matters for adjudication which have been adjudicated and decided by the Adjudicating Authority through the impugned order. As against the impugned order, an appeal has been provided before the Appellate Tribunal under Section 19 of the Act. Even if there is any failure before the Appellate Tribunal and it goes against the interest of these noticees, again a further appeal is provided under Section 35 of the FEMA Act, where Second Appeal can be preferred before this Court (High Court). When such a hierarchy of appellate forum is provided under the Act itself, whether the jurisdiction that has been conferred under the Act, especially u/s 35 of the Act to the appellate side of this Court, whether can be taken away by entertaining these writ petition is a question, for which the answer is in the negative. The reason being that, the law which has been held by law courts with regard to the exhaustion of alternative remedy is well settled. Though it is not a hard and fast rule that each and every case, the exhaustion of alternative remedy shall stand in the way in entertaining the case under the extraordinary jurisdiction of this Court under Article 226 of the Constitution, still limitations are there for the High Courts who are empowered to issue prerogative writs under Article 226 of the Constitution of India. While exercising such extraordinary jurisdiction under Article 226, the High Court on the one side cannot take away or absolve the appellate jurisdiction being exercised by the same High Court under the provisions of the statute which is special in nature. Here in the case in hand, ultimately the aggrieved party can approach this Court by filing the Second Appeal under Section 35 of the Act, instead, if these writ petitions are entertained and the impugned order of adjudication is challenged and a decision is made on the merits of the issue, certainly that will amount to interfering or transgressing the appellate jurisdiction of this Court, which normally the court would not do in exercising the extraordinary jurisdiction under Article 226 of the Constitution. We do hold that, absolutely there has been no quarrel on the said principle stated by the learned Judge in the said Judgment. However in the facts of the present case, what is the uncurable defect, that has been committed by the original authority in the present case is the question. As we held above, the notice, i.e., show cause notice had already been served properly under the mode as contemplated under the Act as well as the Rule. Therefore, first of all it cannot be construed that the principles of natural justice has been violated. Assuming that, because of the enquiry notice that has not been served on the noticees as claimed by them, whether any injury is caused by virtue of passing of adjudication order, certainly those issues can be canvassed before the Appellate Tribunal challenging the order of adjudication. Hence, we do not find that any uncurable defect or injustice caused to the noticees at the adjudication stage and therefore, that cannot be stated that such a defect, if any, cannot be cured by the appellate forum. We have held that, as contemplated under Section 16 r/w Rule 4 and 14 of the Rules, show cause notice since have been served on all the petitioners herein, i.e., Noticee No.4,17 and 20, on the alleged ground of violation of principles of natural justice, these writ petitions cannot be entertained especially in applying the principle as laid down by the Hon ble Supreme Court in the Radha Krishan Industries case cited supra. Despite the above, it is open to the petitioners to raise these point of the violation of principles of natural justice before the Appellate Tribunal in case still the petitioners feel that the issue also can be adjudicated as one of the issue before the Appellate Tribunal. That apart, insofar as the merits of the case is concerned, as we held above, we do not want to hold anything on the merits of the case, because that will have a bearing on the cause of the petitioners, when they approach the Tribunal by filing the appeal. WP dismissed. However it is open to the petitioners to approach the Appellate Tribunal by filing appropriate appeal against the impugned order of adjudication u/s 19 of the FEMA Act.
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PMLA
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2023 (12) TMI 913
Illegal detention of the petitioners in Tihar Jail for want of judicial order remanding them to judicial custody - seeking for issuance of writ of habeas corpus or any other appropriate direction to the respondents, inasmuch as the fundamental rights of the petitioners as guaranteed under Articles 14, 21 and 22 of the Constitution of India have been violated - HELD THAT:- Pertinently, a writ of habeas corpus is an extraordinary remedy, when there is illegal confinement violating the personal liberty of a person. Ordinarily, an order of remand by a competent court is essentially a judicial function and cannot be challenged by way of writ of habeas corpus unless and until the remand order lacks jurisdiction or is absolutely illegal resulting in unlawful custody . It is true that an order of remand can be challenged in a Habeas Corpus petition if such an order is passed in an absolutely mechanical or casual manner. The contention of learned Senior Counsels for the petitioners cannot be brushed aside that a valid custody remand can be made in accordance with express provisions of law, when the custody of an arrested person is illegal, such a person is entitled to be released forthwith. The power of remand is vested in the Court, firstly, at the stage of investigation, when the arrested person can be remanded initially either to police custody or judicial custody. Whereas, custody remand under Section 309 Cr.P.C operates only at post cognizance stage after conclusion of investigation when chargesheet is laid before the Court. In the present petitions, in fact, initially after being remanded to police custody, the petitioners were being remanded to judicial custody from time to time under Section 167(2) Cr.P.C by the court of learned ASJ-05 till 07.12.2003. Nature of custody of the petitioners, whether legal or illegal - HELD THAT:- Two situations have emerged when the chargesheet/prosecution complaint is filed in the Court. One is, when remand under Section 167(2) Cr.P.C has not expired and in the meanwhile chargesheet/prosecution complaint is filed by the investigating agency and the competent court takes cognizance under Section 309 Cr.P.C on the said chargesheet/prosecution complaint. On the date of taking cognizance, the accused is not produced before the Court and is not remanded to the judicial custody under Section 309 Cr.P.C. However, the Court issues production warrant against the accused for production on the next date of hearing. The validity of such remand under Section 167 Cr.P.C was challenged before this Court in case of Sunil Kumar Sharma vs. State of NCT of Delhi ILR [ 2005 (6) TMI 576 - DELHI HIGH COURT] - In the said case, during the period of a valid order under Section 167 Cr.P.C, accused was placed under judicial custody, his remand was to continue till 26.04.2005, however, the chargesheet was filed on 25.04.2005 and the Magistrate took cognizance on the chargesheet on the same day as the accused was in judicial custody till 26.04.2005. Production warrants were issued against him for the same date. The objection raised on behalf of the accused contemplating illegal custody on 25.04.2005 was that no valid order for remand was passed under Section 167(2) Cr.P.C or under Section 309(2) Cr.P.C on 25.04.2005 or on 26.04.2005. The second situation is, when the chargesheet/prosecution complaint is filed before the competent court and cognizance is not taken by the Court under Section 309 Cr.P.C. However, the remand of said accused continues under the orders of the Magistrate. The Hon ble Supreme Court, in the case of Suresh Kumar Bhikamchand Jain [ 2013 (2) TMI 821 - SUPREME COURT] has observed that such remand granted by the Magistrate was valid and the accused remained in the custody of the Magistrate till cognizance is taken by the concerned court. It is also held that in such a situation the accused has to remain in custody for some court . Assuming a competent court has taken cognizance of chargesheet/prosecution complaint and posts the case at a particular stage of proceedings/trial, however, on the said date of hearing, the accused in that case is not produced from judicial custody, due to some unavoidable reason. In such a situation, the court issues production warrant against the said accused and the case is posted for the next date of hearing. Can it be said, during the period, when the accused was produced on the last date of hearing and is to be produced before the court on the next date of hearing in execution of production warrants, his judicial custody is illegal - the answer is in negative, as in such a situation, the custody of accused is continuum and there is no break in the custody of such an accused. The position, however, will be different when, the accused is not produced before such a Court on the date of hearing and no production warrant is issued for the said accused on the same date of hearing but is issued subsequently. In such a situation, the custody of the accused will not be in continuum and for the break period, it may be illegal. The submissions made on behalf of the petitioners that the petitioners are suffering illegal custody since 07.12.2023, cannot be sustained - the learned ASJ-04 has rightly issued production warrants against the petitioners on 07.12.2023 for production of the petitioners and the petitioners remain in lawful custody of learned ASJ-04 - petition dismissed.
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Service Tax
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2023 (12) TMI 912
Jurisdiction which the petitioners allege against the respondents - Suppression of facts or not - invocation of extended period of limitation - HELD THAT:- It is a matter of how the agreement is to be construed as such and whether the State was contributing in any manner in the running of the hospital. This is a matter of fact which has to be analyzed by the statutory authorities in appeal and to be summarized. The right of the petitioner thereafter to challenge the order in case the same is decided against it would always be available. The issue of extended period of limitation whether it has been rightly invoked or not, is a matter which the Appellate Authority can go into and since the impugned order records the fact that the consideration was being received at 5% of the gross revenue and as per the provisions of the concessionaire agreement. Apparently from the show cause notice, it would be clear that it was only when the revenue had started investigation against Max Super Speciality Hospital, Mohali regarding non-payment of service tax, it had come to their notice about the arrangement which has been made with the petitioner and thereafter the proceedings had been initiated and, therefore, the issue of jurisdiction is also based on a factual matrix. It would also be a matter of fact which would be within the jurisdiction of the Appellate Authority as to whether the notices as such issued were within the prescribed period and whether the action of the Revenue in extending the period of limitation is justified or not in the facts and circumstances. The writ petition is disposed of and the petitioners are relegated to the remedy of appeal. Needless to say that since the petitioners had approached this Court on 29.08.2023, if the appeal is filed within a period of 4 weeks from today.
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2023 (12) TMI 911
Non-payment of service tax - business auxiliary service - incentives received from the Central Reservation System Companies (CRS) Companies and Airlines on the sale of tickets - service charges received by the appellant from clients for visa consultation - incentives received from medi-claim insurance companies - incentives received from Foreign Exchange brokers - incentives received from Miscellaneous Receipts - Denial of CENVAT credit on the ground that invoices bear address as 1400, Modi Tower, 98, Nehru Place, New Delhi. Non-payment of service tax under BAS on the incentives received from the CRS Companies and Airlines on sale of tickets - HELD THAT:- This issue has been decided in favour of the appellant by a Larger Bench of the Tribunal in KAFILA HOSPITALITY TRAVELS PVT. LTD. VERSUS COMMISSIONER, SERVICE TAX, DELHI [ 2021 (3) TMI 773 - CESTAT NEW DELHI (LB)] . The Larger Bench held that by rendering services connected to travel by air, a travel agent would render air travel agent services, which services cannot be said to be for promotion or marketing for the airlines - in view of the aforesaid decision of the Larger Bench of the Tribunal in Kafila Hospitality, service tax could not have been demanded from the appellant under BAS on the incentives that were received from CRS Companies and Air Lines on sale of tickets. Non-payment of service tax under BAS on the service charges received by the appellant from clients for visa consultation - HELD THAT:- The services rendered by the appellant are not covered under the definition of BAS as the appellant is not involved in promotion and marketing or sale of any goods or service nor is the appellant providing any customer care service on behalf of the client or procuring goods or services which are inputs for the client. While providing such services, the appellant does not act as an agent of the embassies or of the individuals who require the assistance in obtaining VISA and, therefore, such services are not provided on behalf of anyone. The activities of the appellant would not be covered under BAS - service tax could not have been demanded from the appellant under BAS on the service charges received by the appellant from clients for visa consultation. Non-payment of service tax under BAS on the incentives received from Mediclaim Insurance Companies - HELD THAT:- The Insurance Companies provide the mediclaim insurance policies to the individuals. The Insurance Companies make payment of incentives on their own as per their policy on which the appellant has no control. The appellant merely receives incentives from the insurance companies and does not raise any invoice on the Insurance Company. The liability to pay service tax on commission paid to agents is on Insurance Company. The appellant is not involved in promotion or marketing or sale of any goods or service and the appellant is also not providing any customer care service on behalf of the client or procuring goods or services for the clients. The activities of the appellant would, therefore, not be covered under BAS. Non-payment of service tax under BAS on the incentives received from Foreign Exchange brokers - HELD THAT:- The appellant is not an authorized money changer as per the Reserve Bank of India requirement. Thus, for the Foreign Exchange required by the passenger, the payment is made directly by the passenger in the name of authorized money changer. The authorized money changer makes payment of incentive on its own to the appellant as per their policy and market rates of Foreign Exchange from time to time. The appellant does not raise any invoice on the authorized money changer. The appellant is not involved in promotion or marketing or sale of any goods or services nor is the appellant providing any customer care service on behalf of the client or procuring goods or services for the client. The client or the service recipient are the Foreign Exchange brokers who pay for the service - The reasons given by the Commissioner (Appeals) for confirming the demand on the incentives received by the appellant from Foreign Exchange brokers is the same as that for confirmation of the demand on service charges received by the appellant from clients for Visa Consultation. The confirmation of this demand, therefore, would also have to be set aside. Non-payment of service tax under the category BAS on the incentives received from Miscellaneous Receipts - HELD THAT:- According to the learned counsel for the appellant, the appellant is not involved in promotion or marketing or sale of any goods or service - There is force in the submission advanced by the learned counsel for the appellant. When the aforesaid services have already been taxed under air travel agency service, the incentives received from Miscellaneous Receipts arising out of the same transaction cannot be taxed under BAS. The confirmation of demand, therefore, deserves to be set and is set aside. Denial of CENVAT credit - Credit denied on the ground that invoices bare address as 1400, Modi Tower, 98 Nehru Place which is the address of the registered premises and not 110, Modi Tower, 98 Nehru Place which is the address of the travel agency division of the appellant specified in ST-2 form - HELD THAT:- There is no dispute on receipt of service and payment made. According to the appellant, the issue of PAN based registration has been decided in favour of the appellant meaning thereby that registration of the service provider is not in dispute. Thus, once registration of service provider and rendition of service and payment thereof is not in dispute, mere mention of the wrong address is a procedural defect and CENVAT credit cannot be denied for this reason - The appellant was, therefore, clearly entitled to CENVAT credit and it could not have been denied merely on the ground of procedural lapses. The impugned order dated 28.11.2016 passed by the Commissioner (Appeals) cannot be sustained and is set aside - Appeal allowed.
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2023 (12) TMI 910
Maintainability of appeal - non-prosecution of the case - matter adjourned beyond three times - HELD THAT:- In case of ISHWARLAL MALI RATHOD AND SMT. LEELABAI ONE ANOTHER VERSUS GOPAL OTHERS (VICE-VERSA) [ 2021 (2) TMI 1360 - MADHYA PRADESH HIGH COURT] condemning the practice of adjournments sought mechanically and allowed by the Courts/Tribunal s Hon ble Supreme Court has observed considering the fact that in the present case ten times adjournments were given between 2015 to 2019 and twice the orders were passed granting time for cross examination as a last chance and that too at one point of time even a cost was also imposed and even thereafter also when lastly the High Court passed an order with extending the time it was specifically mentioned that no further time shall be extended and/or granted still the petitioner defendant never availed of the liberty and the grace shown. In fact it can be said that the petitioner defendant misused the liberty and the grace shown by the court. It is reported that as such now even the main suit has been disposed of. In view of the circumstances, the present SLPs deserve to be dismissed and are accordingly dismissed. There are no justification for adjourning the matter beyond three times which is the maximum number statutorily provided - Appeal is dismissed for non prosecution in terms of Rule 20 of CESTAT Procedure Rules, 1982.
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2023 (12) TMI 909
Levy of Service Tax - Restaurant Service - rendering Mandap Keeper Service, Cab Operator Service and Business Auxiliary Service - Department was of the view that the respondent was liable for registration and payment of Service Tax on Restaurant Services provided in respect of food and beverages, including alcoholic beverages or both, in their premises - exemption under Notification No. 25/2012-ST dated 20.06.2012. HELD THAT:- As the restaurants though located in the premises of Hotel Sangam in Trichy and Thanjavur, they are clearly demarcated from the permit room and these restaurants are separately named and the service activities in the restaurants are not linked to the service activities in the permit room or bar. As the restaurants located in the premises of Hotel Sangam in Trichy and Thanjavur, do not fulfil the requirement of having a licence to serve alcoholic beverages, the services provided in the restaurant does not come under the ambit of Restaurant Services . The basic premise of the Show Cause Notice for demanding Service Tax from the appellant is that the services from the restaurant are located within the premises of the hotel and the hotel has a licence to serve liquor, hence, the restaurant fulfills the requirements under the category of Restaurant Services is not legally correct and this inconsistent interpretation has to be discarded. The term establishment as figuring in the definition under Section 65(105)(zzzzv) has been referred to as the Hotel in whose premises the restaurant is located and not for the Restaurant . As such, the restaurants located in the appellant s premises both at Trichy and Thanjavur have not satisfied one of the conditions of serving alcoholic beverages and so the Service Tax liability cannot be fastened in respect of restaurant service on the appellant. As held by the Hon ble Supreme Court in the case of COMMISSIONER OF CENTRAL EXCISE, BOLPUR VERSUS M/S RATAN MELTING WIRE INDUSTRIES [ 2008 (10) TMI 5 - SUPREME COURT] , the Department Circulars and instructions are binding on the Revenue authorities under the respective statutes and as such, in view of the express clarification issued vide Circular No. 139/8/2011-TRU dated 10.05.2011, the impugned order could not have been challenged by filing an appeal by the Department as in doing so, it goes against the Circular issued by the Board. The contentions advanced on behalf of the Department are without substance as the Circulars / Notifications ibid do not run contrary to the provisions of the Act - there is no reason to differ with the Order-in-Original No. 06/2014- ST dated 20.02.2014 passed by Commissioner of Central Excise and Service Tax, Trichy - As the demand cannot sustain, there is no need to discuss about the invocation of extended period in this appeal. The impugned order does not call for any interference - the Department s appeal stands dismissed.
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2023 (12) TMI 908
Classification of service - cleaning activity or not - services relating to fumigation of export containers - HELD THAT:- A bare perusal of the definition of cleaning activity under section 65(24b) of the Finance act would indicate that it means cleaning, including specialized cleaning services such as disinfecting, exterminating or sterilizing of objects or premises of commercial or industrial buildings and premises thereof; or factory, plant or machinery or buildings, but would not include such services in relation to agriculture, horticulture, animal husbandry or dairying - In the instant case, the activity of fumigation of containers was not of commercial or industrial building or premises thereof. It would, therefore, not be covered by the definition of cleaning activity under section 65(24b) of the Finance Act. Circular dated 12.01.2011 was amended by Circular dated 20.01.2011 by deleting the word Circular at paragraph 2(b) and replacing it by Notification - A perusal of the aforesaid Circular shows that fumigation of export cargo would not satisfy the statutory definition of cleaning activity under section 65(24b) of the Finance Act and it is only as a matter of abundant caution that the government had issued the Notification dated 06.10.2007 which was subsequently amended on 29.11.2007 and that the wordings of the Notification cannot be used to interpret the scope of the service taxable under section 65(105) (zzzd) of the Finance Act. The Commissioner (Appeals) completely fell in error in holding that because the Notification dated 06.10.2007 exempts the cleaning activity services, it should be held that they were taxable and for claiming exemption the conditions have to be satisfied. The Commissioner (Appeals) also fell in error in misreading the Circular dated 12.01.2001 - Once it is clear that fumigation of export containers would not fall within the definition of cleaning activity defined under section 65 (24b) of the Finance Act, service tax could have been levied. The impugned order dated 04.05.2018 passed by the Commissioner (Appeals) is set aside - Appeal allowed.
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2023 (12) TMI 907
Maintainability of appeal - appeal dismissed on the ground of non-fulfilment of mandatory pre-deposit condition - violation of principles of natural justice - HELD THAT:- It is seen that the Appellant has canvassed once again all the details before the Commissioner(Appeals). Even he did not take any trouble to get these facts verified from the office of the adjudicating authority and has mechanically passed this impugned order dismissing the Appeal filed by the Appellant. After observing that gross violation of principles of natural justice has taken place, in the interest of justice, the details is gone through and it is found that the amount of Rs.3,26,322 + Rs.29,449/- already stands paid by the appellant before issue of the Show Cause Notice and is more than the pre-deposit equivalent of 10% of the litigated amount. The defect stands cured - the Appeal itself taken for disposal as the issue is in a short compass - matter remanded to the adjudicating authority to go through all the details given in the letters submitted by the Appellant and also grant Personal Hearing and follow principles of natural justice.
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2023 (12) TMI 906
Levy of Service tax - security agency services - collection of security charges for providing police guards to various banks for their security - HELD THAT:- It has been held in the case of SUPERINTENDENT OF POLICE VERSUS COMMISSIONER OF CENTRAL EXCISE, JAIPUR [ 2019 (11) TMI 250 - CESTAT NEW DELHI] that merely because the Police may charge a fee it would not become a person engaged in the business of providing security and, therefore, no service tax can be levied. The impugned order dated 28.07.2014 is set aside and appeal is allowed.
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2023 (12) TMI 905
Levy of service tax - Manpower Recruitment Service - services of Loading of Scrap into Trucks for onward transportation rendered by the Appellant to their client - HELD THAT:- The Appellant has collected the charges @ Rs. 429/- per trip. The loading was done by engaging Crane and helpers/operator. The Appellant was never obliged to supply labour or manpower. They were only required to perform a specific job of loading . Further, they were paid against the loading of truck which is at the rate of 'per trip' and not on the basis of 'number of manpower' deployed. Thus, the service rendered by the Appellant cannot be categorized as 'Manpower Recruitment Service'. The services of Loading of Scrap into Trucks for onward transportation rendered by the Appellant to their client are not liable to service tax under the category of 'Manpower Recruitment Service' - the demand confirmed in the impugned order is not sustainable. Since, the demand itself is not sustainable, the question of demanding interest and imposing penalty does not arise. Appeal allowed.
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2023 (12) TMI 904
Levy of service tax - earnest money deposit/security deposit - liquidated damages collected by the appellant - service in the nature of agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act as defined under section 66E (e) of Finance Act or not - HELD THAT:- In M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] , the Tribunal held that since liquidated damages recovered on account of breach or non-performance of contract are not consideration for any service, but are in the nature of deterrent imposed so that such a breach or non-performance is not repeated service tax would not be leviable on the amount so collected. The Circular dated 28.02.2023 issued by the Central Board of Indirect Tax and Customs also provides that service tax cannot be levied on the amount collected for the said purpose. In view of the aforesaid decision of the Tribunal in South Eastern Coalfields and the Circular dated 28.02.2023 issued by the Central Board of Indirect Tax and Customs, the contention advanced by the learned counsel for the appellant has to be accepted. It is, therefore, not possible to sustain the demand. The order dated 25.06.2019 passed by the Commissioner (Appeals) is, accordingly, set aside - Appeal allowed.
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2023 (12) TMI 903
Levy of service tax - declared service or not - Debit notes raised to offset the excess credit in the ledger account - Notice pay recovery - Cheque return penalty - Liquidated damages - HELD THAT:- A service conceived in an agreement where one person, for a consideration, agrees to an obligation to refrain from an act, would be a 'declared service' under section 66E(e) read with section 65B(44) and would be taxable under section 68 at the rate specified in section 66B. Likewise, there can be services conceived in agreements in relation to the other two activities referred to in Section 66E(e). Debit notes - HELD THAT:- The debit notes are mere book adjustments to balance the ledger. The appellant has merely followed the price reduction method with the suppliers. In terms of the agreement price is agreed upon on the commitment by the supplier to supply the goods. However, upon delivery, the price of the delivered goods is reduced if it falls short in quantity or quality. Such price reduction is effected through debit notes issued by the appellant to the suppliers. It is apparent that no consideration is paid. The Tribunal in M/S FUTURA POLYESTER LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE. CHENNAI-I [ 2013 (1) TMI 658 - CESTAT CHENNAI] also held that no tax can be levied merely because of the entries made in the books of account. In the present case, there is no separate agreement and the provisions of section 66E(e) have been applied in terms of the purchase order, as is clear from paragraph 3 of the show cause notice. Notice pay recovery - HELD THAT:- The Madras High Court in GE T D INDIA LIMITED (FORMERLY ALSTOM T D INDIA LIMITED) VERSUS DEPUTY COMMISSIONER OF CENTRAL EXCISE [ 2020 (1) TMI 1096 - MADRAS HIGH COURT] in no uncertain terms, also held that notice pay recovery is not subject to service tax. Cheque bounce penalty - HELD THAT:- Circular No. 178/10/2022-GST dated-3-8-2022 has clarified that cheque bounce penalty is not subject to Goods and Service Tax and the reasoning would also be applicable to service tax - The Tribunal in M/S. ROHAN MOTORS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE, DEHRADUN [ 2020 (12) TMI 1014 - CESTAT NEW DELHI] also held that cheque dishonour amount is deterrent in nature and not towards consideration for any service. Liquidated damages - HELD THAT:- Though the department had filed Civil Appeal No. 2372 of 2021 before the Supreme Court in COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS SOUTH EASTERN COALFIELDS LTD [ 2023 (8) TMI 606 - SC ORDER] to assail the decision of the Tribunal rendered in M/S SOUTH EASTERN COALFIELDS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX, RAIPUR [ 2020 (12) TMI 912 - CESTAT NEW DELHI] but in view of the Circular dated 28.02.2023 issued by the CBIC, the Civil Appeal was dismissed as withdrawn on 11.07.2023. Thus, as none of the four demands can be sustained, the order dated 08.03.2018 passed by the Commissioner is set aside - appeal allowed.
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Central Excise
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2023 (12) TMI 902
Appropriate forum for determination of taxability or excisability of goods for the purposes of assessment - Supreme Court or High Court - Classification of services - intermediary services or not - Rule 2(f) of the Place of Provision of Service Rules, 2012 - HELD THAT:- Reliance has been placed upon the judgment of the Division Bench of the Delhi High Court in Commissioner of Income Tax, New Delhi vs. Menon Associates, [ 2014 (11) TMI 970 - DELHI HIGH COURT ] wherein, a similar issue was considered regarding the concurrent appellate jurisdictions of the High Court and the Supreme Court. The discussion was, thus, made whether the appeal was maintainable before the Delhi High Court and after recording a finding that the issue was that whether service tax was payable and whether the service rendered was export and no service tax was payable, the appeal was directed to be returned back to take appropriate steps as per law. Faced with this situation, counsels for the Revenue also could not point out any judgment to the contrary. The appeal is not maintainable and the same is dismissed.
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2023 (12) TMI 901
Process amounting to manufacture or not - Availment of CENVAT Credit - Countervailing Duty (CVD) and additional Special Excise Duty paid on the imported Flux cored wires - availment of credit of these duties which were then utilised while paying duty on removal of finished goods - activity carried out on the imported Flux Cored Wire, did not amount to manufacture - violation of Rule 3 of CENVAT Credit Rules, 2004 - Extended period of limitation. HELD THAT:- The case of the department against the Assessee was that the activity carried out by them did not amount to manufacture inasmuch as the flux cored wire remains flux cored wire only. In short, the process of drawing has not been disputed in the SCN. Issue of whether an activity or process amounts to manufacture has been discussed time and again by various courts including the Hon ble Supreme Court. It is a settled law that for any process to be considered as manufacture it must satisfy the test given under Section 2 (f) of Central Excise Act, 1944 - While 2(f)(i) provides that any activity incidental or ancillary to the completion of a manufactured product will be treated as Manufacture, sub clause (ii) of Section 2 (f) of the CEA, 1944, is a deeming fiction as per which any activity specified in relation to any goods in the Section or Chapter notes of the Fourth Schedule as amounting to manufacture will be deemed to be treated as manufacture. The activity of drawing or re-drawing a rod, wire or any other similar article into wire amounts to manufacture. In the present case as reproduced by us above, semi-finished flux cored wire in case of 400-700mm is passed through vertical killing rollers to achieve the shape and dimension of the coil having desired cast range between 800-1000mm. The said wire is thereafter layered to meet the Indian requirements post which the same are packed. Even going by the language of show cause notice, the department has not disputed that the activity of drawing/re-drawing of wire was carried out by the Appellant. Given the same we have no hesitation in holding that keeping in mind Note 10 to Section XV, the activity carried out by the Appellant amounts to manufacture. The aforesaid activity/process is undertaken by the Appellant as proper cast, helix and layering are important for weld accuracy and improper wire cast and helix reduces weld quality and adds to direct labour and factory overhead costs. The said process independently also enhances the performance of the Final product manufactured by the Appellant and therefore even if it is assumed that the allegation made by the department that the input in its imported form is a fully manufactured product is accepted to be true, even then the process undertaken by the Appellant on the imported goods being incidental to the completion of the manufactured goods and would amount to manufacture in terms of Section 2(f)(i) of the CEA, 1944. The process carried out by the Appellant enhances the performance of the product as has been clarified by Mr. Balasubramanium. The Adjudicating authority has completely misunderstood the reliance placed by the Appellant on the said opinion and has wrongly displaced the same on the ground that the same has no bearing on facts of the present case. There are merits in the submissions of the Appellant that the activity carried out by them is important to make the product marketable and the same can be treated as an activity which is incidental or ancillary to the completion of manufactured product. In view of the above, the process undertaken by the Appellant will prima facie amount to Manufacture under clause (i) of Section 2(f) of the Central Excise Act. Whether it was open for the adjudicating authority to introduce a new document after the issuance of SCN and first stage of remand? - HELD THAT:- In the first round of litigation, vide order dated 02.04.2019 the case was remanded back for fresh adjudicating by this Tribunal with a specific direction that the vital argument on applicability of Note 10 to Section XV of CETA has not been considered - The Respondent in compliance with the directions of this Hon ble Tribunal listed the matter for fresh hearing. However, we note the Respondent instead of deciding the matter basis the documents placed before him, has relied solely upon Panchnama dated 05.06.2020 wherein statement of Mr Shinde was recorded who stated that no process as mentioned by the Appellant of drawing was carried out in their factory premises. The said Action on the part of the Respondent is clearly beyond the scope of remand order and cannot be upheld. It appears to us, that on finding that the SCN is issued contrary to Note 10 to Section XV, the Respondent decided to change the narrative of the allegations by introducing a new document in the form of Panchnama much after the close of Investigation and even after the first round of Litigation had concluded. In the said Panchnama the department has made out a totally new case i.e. no process was carried out in the factory of the Appellant and to prove the same statement of Mr. Shinde has been relied upon who admittedly started working as Plant Head with the Appellant organisation much after the period of dispute viz. 20.05.2018. The said action of introducing a new document and changing the case post issuance of the SCN cannot be permitted on more than one count - The impugned order on the other hand relies upon the Panchnama which was drawn after the first round of litigation. The said document to start with could not have been relied upon. If the department is permitted to improve upon or change its case after issuance of a show cause notice, the same will lead to every matter getting into an endless litigation loop. The same can never be the intention of the legislature. There are merits in the submission of the Appellant that the department has tried to circumvent the provisions of Section 11A which permits issuance of show cause notice for a maximum period of 5 years from the date of issuance of Notice in case of fraud suppression or wilful mis-statement. Show cause notice dated 08.05.2017 was issued demanding cenvat credit for the period 2012-2017 by invoking extended period of limitation of 5 years. The Respondent by placing reliance on the Panchnama dated 05.06.2020 has totally introduced a new case and if the said document is admitted as evidence the period for which demand was sought to be confirmed will go much beyond the statutory period of 5 years - the Respondent had no jurisdiction to change the case made out in original show cause notice by introducing a new document post issuance of the same. Extended period of limitation - HELD THAT:- There was no dispute raised on availment of credit on imported inputs as the main activity did not amount to manufacture. The same shows that all facts were well within the knowledge of the revenue and therefore question of invoking extended period of limitation in the present case does not arise. Even the other two audit reports are dated 29.04.2013 and 10.04.2014 and the period for which audit was conducted overlaps with the period of dispute in the present case. Accordingly, the department cannot allege fraud and suppression in the present case as all facts were within their knowledge. Hon ble Supreme Court in following cases have held that extended period cannot be invoked if facts were within the knowledge of the department. The issue in the present case relates to Manufacture and the bonafides of the Appellant can be seen from their act of paying duty on the Final product - the demand of cenvat credit is not sustainable both on merits and limitations - Appeal allowed.
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2023 (12) TMI 900
100% EOU - refund of unutilized cenvat credit on input and input services - rejection of refund claim on the ground that it was filed beyond the time limit from the date of issue of Order-in-Appeal in accordance with Explanation B(ec) to Section 11B - HELD THAT:- Rule 5 for refund of cenvat credit under Cenvat Credit Rules, 2004 read with Notification No. 27/2012-CE (NT) dated 18.6.2012 clearly states that refund claim should be accompanied with the copies of the shipping bills which is the basis for claiming any refund under the said Rule. The Original Authority on verification, sanctioned refund claim only to the extent of claim being complete and rejected balance as it was not accompanied with the relevant shipping bills. The basis for filing a refund claim under Rule 5 is the shipping bill, whereas the appellant filed the complete refund claim along with the shipping bills only on 14.10.2019 i.e., after two years from the date of order of the Commissioner (A) is clearly time barred and hence, the claims rejected on time bar by the authorities is justified. Also, the present appeal is under Rule 5 of the Cenvat Credit Rules, 2004 and hence the question of refund under Section 142 does not arise. Moreover, as per Section 142, any claim for refund of CENVAT credit is fully or partially rejected, the amount so rejected shall lapse as seen from clause (3) of Section 142. The appeal is dismissed.
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2023 (12) TMI 899
Adjustment of excess duty to that of duty short-paid during the period of provisional assessment - Applicability of principles of unjust enrichment to the amount excess paid before adjusting the same with the amount short-paid while finalising provisional assessment under Rule 7 of the Central Excise Rules, 2002. HELD THAT:- Undisputedly, the appellant has resorted to provisional assessment under Rule 7 of the Central Excise Rules, 2002 at the time of clearance of the goods from the factory to the depots, since certain conditional discounts passed on to the customers on sale from depots subsequently, the exact quantum of which is known only after its clearance from factory and sale from depots. When the exact amount of discount is ascertained, the admissible discounts are calculated on month-to-month basis and the assessable value at the time of clearance from the factory is redetermined and the duty payable is accordingly arrived at. Consequently, the difference between the duty paid and the duty payable is calculated and the assessment is finalized. The result of the said exercise may end up with recovery of differential duty short paid or refund of excess paid. The Revenue s contention is that after determination of the exact duty payable on finalization of assessment, excess duty paid cannot be adjusted against duty short paid, without testing its incidence of excess duty whether passed on to any other person in compliance with the statutory presumption under section 12B of CEA, 1944. It is their argument that netting of duty by passing the statutory presumption is not laid down under Rule 7 of Central Excise Rules,2002. Accordingly, duty liability is calculated against the duty provisionally paid at the time of clearance of the goods from the factory and the amount payable - The Revenue s objection is that the duty excess paid cannot be adjusted against the duty short-paid during a particular month/period of assessment to arrive at the net result of refund or liability. It is the Revenue s contention that there is no specific provisions under Rule 7 of the Central Excise Rules, 2002 directing such adjustment/netting off duty. It has been brought to our notice that the said judgment of the Hon ble Karnataka High Court in Sudhir Papers Ltd. vs. Commissioner of Central Excise, Bangalore-I [ 2011 (3) TMI 1443 - KARNATAKA HIGH COURT ] has been accepted by the Revenue as communicated through their letter dated 17.11.2023. Needless to mention, the principle laid down by the jurisdictional High Court is binding on the Tribunal in view of the judgment of the Larger Bench of the Tribunal in the case of COLLECTOR OF CENTRAL EXCISE, CHANDIGARH VERSUS KASHMIR CONDUCTORS [ 1997 (7) TMI 186 - CEGAT, COURT NO. II, NEW DELHI] . The impugned order is set aside and the appeals are allowed.
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CST, VAT & Sales Tax
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2023 (12) TMI 898
Validity of Circular No.VII-12-1-2016-Rev-Sec-CCT-17265/CT dated 16.11.2016 under Annexure-8 issued by Commissioner of Commercial Taxes, Government of Odisha, Cuttack - circular was within authority or not - challenge to audit visit report in Form VAT-303, notice in Form VAT-306 for assessment under Section 42 of the Odisha Value Added Tax Act, 2004, order of assessment in Form VAT-312 which is the result of aforesaid circular dated 16.11.2016 issued by the Commissioner of Commercial Taxes, Government of Odisha, Cuttack - HELD THAT:- The assessment order has been passed on 29.06.2017 under Section 42 of the OVAT Act, 2004 for the periods from 01.04.2014 to 30.09.2015 which was based on Audit Visit Report restricting tax periods prior to aforesaid amendment. Though aforesaid circular has been quashed by this Court, the assessing authority while passing the final order of assessment has taken into account the Audit Visit Report submitted restricting the period till 30.09.2015 by issue of intimation vide Annexure-2. Thus, in the fact situation, it appears, the circular dated 16.11.2016 had no impact on the assessment order dated 29.06.2017 passed under Section 42 of the OVAT Act for the tax periods from 01.04.2014 to 30.09.2015. This Court finds no infirmity in amending the impugned notice dated 26.09.2016 vide Annexure-1 wherein the authority rectified the notice limiting the tax periods for tax audit from 01.04.2014 to 30.09.2015 instead of 01.04.2014 to 31.03.2016. In consequence thereof such tax audit being conducted and the assessing authority having passed assessment order under Section 42 of the OVAT Act for the tax periods from 01.04.2014 to 30.09.2015, this Court is not inclined to entertain this writ petition. However, if the Petitioner is so advised, may avail the remedy available under the OVAT Act. The writ petition stands disposed of.
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Indian Laws
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2023 (12) TMI 897
Stamping of arbitration agreements - whether such arbitration agreements would be non-existent, unenforceable, or invalid if the underlying contract is not stamped? As per Dr D hananjaya Y Chandrachud, CJI The consequences of the failure to stamp an instrument - HELD THAT:- The procedure contemplated by the Stamp Act facilitates the collection of revenue. It permits instruments to be impounded not only by persons in charge of a public office or those who are empowered by law to receive evidence but also by any person who is empowered to receive evidence by consent of parties. The statute then sets out the procedure to be followed upon impounding a document. This procedure ensures that stamp-duty is paid. After the payment of the appropriate amount under the appropriate description in Schedule I and the penalty (if any), the Stamp Act provides for the certification of such payment by an endorsement by the appropriate authority. Once an instrument has been endorsed, it may be admitted into evidence, registered, acted upon or authenticated as if it had been duly stamped. The difference between inadmissibility and voidness - HELD THAT:- When an agreement is void, we are speaking of its enforceability in a court of law. When it is inadmissible, we are referring to whether the court may consider or rely upon it while adjudicating the case. This is the essence of the difference between voidness and admissibility. Section 35 of the Stamp Act renders a document inadmissible and not void - HELD THAT:- The arbitration agreement must satisfy the requirements of the Contract Act. However, the authority empowered to adjudicate whether the requirements of the Contract Act are satisfied is the arbitral tribunal, under Section 16 of the Arbitration Act. The purpose of the Stamp Act - HELD THAT:- The Stamp Act is a legislation which is enacted in the interest of the revenue. The statute must be interpreted with due regard to its purpose. The Arbitration and Conciliation Act 1996 - HELD THAT:- The Arbitration Act was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to the conciliation and for matters connected therewith or incidental thereto. In the process, the Arbitration Act repealed the 1940 Act, the Arbitration (Protocol and Convention) Act 1937, and the Foreign Awards (Recognition and Enforcement) Act 1961. Arbitral autonomy - HELD THAT:- The principle of arbitral autonomy is an integral element of the ever-evolving domain of arbitration law. Arbitral autonomy means that the parties to an arbitration agreement can exercise their contractual freedom to bestow the arbitral tribunal with the authority to decide disputes that may arise between them. The basis of arbitral autonomy is to give effect to the true intention of parties to distance themselves from the risk of domestic judicial parochialism. Principle of minimum judicial interference - HELD THAT:- Section 5 is of aid in interpreting the extent of judicial interference under Sections 8 and 11 of the Arbitration Act. Section 5 contains a general rule of judicial non-interference. Therefore, every provision of the Arbitration Act ought to be construed in view of Section 5 to give true effect to the legislative intention of minimal judicial intervention. The Arbitration Act is a self-contained code - HELD THAT:- When a self-contained code sets out a procedure, the applicability of a general legal procedure would be impliedly excluded. Being a selfcontained and exhaustive code on arbitration law, the Arbitration Act carries the imperative that what is permissible under the law ought to be performed only in the manner indicated, and not otherwise. Accordingly, matters governed by the Arbitration Act such as the arbitration agreement, appointment of arbitrators and competence of the arbitral tribunal to rule on its jurisdiction have to be assessed in the manner specified under the law. The corollary is that it is not permissible to do what is not mentioned under the Arbitration Act. Therefore, provisions of other statutes cannot interfere with the working of the Arbitration Act, unless specified otherwise. Principles of modern arbitration - HELD THAT:- Modern arbitration law does not completely restrict the role of national courts in the arbitration process, but gives priority to the arbitral tribunal to decide on disputes and issues pertaining to arbitration agreements as well as the substantive rights of the parties. The Arbitration Act reflects these aspects of modern arbitration law - It is the duty of this Court to interpret the Arbitration Act in a manner which gives life to the principles of modern arbitration in India. The law on the arbitration agreement - HELD THAT:- An arbitration agreement is the foundation of arbitration as it records the consent of the parties to submit their disputes to arbitration - Section 2(b) of the Arbitration Act defines an arbitration agreement to mean an agreement referred to in Section 7. Section 7 defines an arbitration agreement to mean an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. It provides that an arbitration agreement could be in the form of an arbitration clause in a contract or in the form of a separate agreement. Further, Section 7 mandates that an arbitration agreement shall be in writing. According to Section 7(4), an arbitration agreement is in writing if it is contained in: (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. Section 7(5) provides that a reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract. Separability of the arbitration agreement - HELD THAT:- The concept of separability or severability of an arbitration agreement from the underlying contract is a legal fiction which acknowledges the separate nature of an arbitration agreement. The separate nature of the arbitration agreement from the underlying contract is one of the cornerstones of arbitration law. As Redfern and Hunter explain, an arbitration agreement is juridically independent from the underlying contract in which it is contained - To properly understand the contours of the separability presumption, it is necessary to understand its origin and development in the international context. Such an analysis is important because any ruling by this Court on the separability presumption ought to be with the aid of international best practices. Correctness of the decision in N.N. GLOBAL MERCANTILE PVT. LTD. VERSUS INDO UNIQUE FLAME LTD. AND ORS. [ 2021 (1) TMI 1121 - SUPREME COURT] - The Constitution Bench acknowledged the separability presumption, but refused to apply it in the context of Sections 33 and 35 of the Stamp Act - The above position of law is contrary to the separability presumption which treats an arbitration agreement as separate from the underlying contract. The doctrine of competence-competence - HELD THAT:- The doctrine of kompetenz-kompetenz (also known as competencecompetence), as originally developed in Germany, was traditionally understood to imply that arbitrators are empowered to make a final ruling on their own jurisdiction, with no subsequent judicial review of the decision by any court - The separability presumption insulates the arbitration agreement from the defects of the underlying contract, and thereby ensures the sustenance of the tribunal s jurisdiction over the substantive rights and obligations of the parties under the underlying contract even after such a contract is put to an end. The doctrine of competence-competence allows the tribunal to decide on all substantive issues arising out of the underlying contract, including the existence and validity of the arbitration agreement. In case the issue of stamping is raised before an arbitral tribunal, Sections 33 and 35 of the Stamp Act make it evident that a person having authority by consent of parties to receive evidence is empowered to impound and examine an instrument. A person having authority by consent of parties to receive evidence includes an arbitral tribunal which is constituted by consent of parties. Negative competence-competence - HELD THAT:- The international arbitration law as well as domestic law prioritize the arbitral tribunal by permitting them to initially decide challenges to their authority instead of the courts. The policy consideration behind this approach is twofold: first, to recognize the mutual intention of the parties of choosing the arbitrator to resolve all their disputes about the substantive rights and obligations arising out of contract; and second, to prevent parties from initiating parallel proceedings before courts and delaying the arbitral process. This is the positive aspect of the doctrine of competence-competence - The negative aspect, in contrast, speaks to the national courts. It instructs the courts to limit their interference at the referral stage by deferring to the jurisdiction of the arbitral tribunal in issues pertaining to the existence and validity of an arbitration agreement. Thus, the negative aspect of the doctrine of competence-competence suggests that the courts should refrain from entertaining challenge to the jurisdiction of the arbitral tribunal before the arbitrators themselves have had an opportunity to do so. Judicial interference under the Arbitration Act - HELD THAT:- When parties enter into an arbitration agreement, it is their mutual and unequivocal intention to submit their disputes to an arbitral tribunal. The arbitration law recognizes this aspect by granting autonomy to the parties to adopt a procedural mechanism for the appointment of arbitrators. Party autonomy has also been expressly recognized by international arbitration covenants as well as national arbitration legislations - Section 5 of the Arbitration Act disallows a judicial authority from intervening unless expressly provided under Part I. In the present proceedings, the exercise of the powers by the courts or judicial authorities as provided under Section 8 and 11 becomes particularly relevant consideration. In the course of the decision, one of the questions before this Court in Vidya Drolia [ 2020 (12) TMI 1227 - SUPREME COURT] was the interpretation of the word existence as appearing in Section 11. It was held that existence and validity are intertwined. Further, it was observed that an arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Therefore, this Court read the mandate of valid arbitration agreement contained in Section 8 into the mandate of Section 11, that is, existence of an arbitration agreement. . Vidya Drolia proceeds on the presumption that Section 11(6A) was effectively omitted from the statute books by the 2019 Amendment Act - We are of the opinion that the above premise of the Court in Vidya Drolia is erroneous because the omission of Section 11(6A) has not been notified and, therefore, the said provision continues to remain in full force. Since Section 11(6A) continues to remain in force, pending the notification of the Central Government, it is incumbent upon this Court to give true effect to the legislative intent. Harmonious construction of the Arbitration Act, the Stamp Act, and the Contract Act - HELD THAT:- The object of the Arbitration Act is to inter alia ensure an efficacious process of arbitration and minimize the supervisory role of courts in the arbitral process. On the other hand, the object of the Stamp Act is to secure revenue for state. It is a cardinal principle of interpretation of statutes that provisions contained in two statutes must be, if possible, interpreted in a harmonious manner to give full effect to both the statutes. The Arbitration Act will have primacy with respect to arbitration agreements - HELD THAT:- The Arbitration Act is a legislation enacted to inter alia consolidate the law relating to arbitration in India. It will have primacy over the Stamp Act and the Contract Act in relation to arbitration agreements for multiple reasons. The Arbitration Act is a special law and the Indian Contract Act and the Stamp Act are general laws - HELD THAT:- It is not only the definition of arbitration agreement but also the other provisions of the Arbitration Act and the purpose for which it was enacted that makes it a special law - The Statements of Objects and Reasons of the Arbitration Act records that the main objective of this law was to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation. Section 5 of the Arbitration Act - HELD THAT:- Section 5 is effectively rendered otiose by the interpretation given to it in N N Global 2. The court failed to provide a reason for holding that Section 5 of the Arbitration Act does not have the effect of excluding the operation of Sections 33 and 35 of the Stamp Act in proceedings under Section 11 of the Arbitration Act. The non-obstante clause in Section 5 does precisely this. In addition to the effect of the non-obstante clause, the Arbitration Act is a special law. We must also be cognizant of the fact that one of objectives of the Arbitration Act was to minimise the supervisory role of courts in the arbitral process. Parliament was aware of the Stamp Act when it enacted the Arbitration Act - HELD THAT:- Parliament was aware of the Stamp Act when it enacted the Arbitration Act. Yet, the latter does not specify stamping as a pre-condition to the existence of a valid arbitration agreement. Further, Section 11(6-A) of the Arbitration Act requires the court to confine itself to the examination of the existence of the arbitration agreement. This provision stands in contrast to Section 33(2) of the Stamp Act which also uses the word examine. Harmonious construction of the three statutes under consideration - The effect of the competence-competence doctrine - HELD THAT:- In A. Ayyasamy v. A. Paramasivam, [ 2016 (10) TMI 1147 - SUPREME COURT] a two-judge Bench of this Court of which one of us, DY Chandrachud, J, was a part emphasized that arbitration must provide a one-stop forum for the resolution of disputes and held that (a) Courts must give effect to the commercial understanding of parties to arbitration agreements that arbitration is efficacious; and (b) This can be done by minimising judicial intervention. The corollary of the doctrine of competence-competence is that courts may only examine whether an arbitration agreement exists on the basis of the prima facie standard of review. The nature of objections to the jurisdiction of an arbitral tribunal on the basis that stamp-duty has not been paid or is inadequate is such as cannot be decided on a prima facie basis. Objections of this kind will require a detailed consideration of evidence and submissions and a finding as to the law as well as the facts. Obligating the court to decide issues of stamping at the Section 8 or Section 11 stage will defeat the legislative intent underlying the Arbitration Act. Once the arbitral tribunal has been appointed, it will act in accordance with law and proceed to impound the agreement under Section 33 of the Stamp Act if it sees fit to do so. It has the authority to receive evidence by consent of the parties, in terms of Section 35. The procedure under Section 35 may be followed thereafter. In this manner, the competence-competence doctrine is given life and arbitration proceedings can continue to remain a faster alternative to suits before the trial courts or other, similar actions. The object of the Stamp Act is preserved - HELD THAT:- The impounding of an agreement which contains an arbitration clause at the stage of the appointment of an arbitrator under Section 11 (or Section 8 as the case may be) of the Arbitration Act will delay the commencement of arbitration. It is a well-known fact that courts are burdened with innumerable cases on their docket. This has the inevitable consequence of delaying the speed at which each case progresses. Arbitral tribunals, on the other hand, deal with a smaller volume of cases. They are able to dedicate extended periods of time to the adjudication of a single case before them. If an agreement is impounded by the arbitral tribunal in a particular case, it is far likelier that the process of payment of stamp-duty and a penalty (if any) and the other procedures under the Stamp Act are completed at a quicker pace than before courts. SMS Tea Estates [ 2011 (7) TMI 1289 - SUPREME COURT] and Garware Wall Ropes [ 2019 (4) TMI 716 - SUPREME COURT] were wrongly decided - HELD THAT:- The non-obstante clause contained in Section 11(6A) pertains to those judicial precedents which delved into the discretion and power of referral courts to intervene and examine the existence and validity of an arbitration agreement at the Section 11 stage. This includes SMS Tea Estates considering the fact that it mandated the referral court to judicially intervene in the arbitration process by impounding the unstamped instrument containing the arbitration agreement. Therefore, we hold that Section 11(6A) also legislatively altered the basis of SMS Tea Estates (supra) to the extent that it dealt with judicial intervention at the Section 11 stage. The discussion has held that non-stamping or insufficient stamping of an instrument does not render it invalid or nonexistent. Therefore, paragraphs 22 and 29 of Garware Wall Ropes, which held that an arbitration agreement contained in an unstamped or insufficiently stamped contract would be non-existent in law, does not set forth the correct position of law. The Appointment of Arbitrators by the Chief Justice of India Scheme, 1996 - HELD THAT:- The referral court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument, but rather leave it for the determination by the arbitral tribunal. When a party produces an arbitration agreement or its certified copy, the referral court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The referral court under Section 11 is not required to examine whether a certified copy of the agreement/ instrument/ contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estate as reiterated in N N Global 2, is no longer valid in law. Vidya Drolia does not deal with the issue of stamping - HELD THAT:- The reasoning in Vidya Drolia does not lead to the conclusion that Garware Wall Ropes was rightly decided either on the aspect of examination and impounding of unstamped or insufficiently stamped instrument with respect to arbitration proceedings, or the validity of on arbitration agreement contained in an unstamped or insufficiently stamped underlying contract. Thus, following conclusions have been reached out by CJI:- a. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable; b. Non-stamping or inadequate stamping is a curable defect; c. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists; d. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are overruled to that extent. The Registry is directed to take administrative directions from Hon ble Chief Justice of India for placing the matters before an appropriate Bench. As per SANJIV KHANNA, J. For the reasons set out in detail by Hon ble the Chief Justice and recorded herein, the conclusions drawn are agreed with.
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2023 (12) TMI 896
Dishonour of Cheque - existence of debt/liability or not - rebuttal of presumption - it is argued that the cheques in question were stolen by the appellant and even signatures over the same are forged - HELD THAT:- In order to rebut the presumption, it was incumbent upon the accused to bring on record such facts and circumstances, upon consideration of which, the Court may either believe that consideration and debt did not exist or their non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that they did not exist. As already stated, nothing has been brought on record to rebut the presumption by the respondent No. 1. There is absolutely nothing in the evidence of respondent No. 1 to infer, even remotely, that neither the amount in question was lent by the appellant nor had she issued any cheques in discharge of the said debt. The reason for which respondent No. 1 is said to have borrowed the amount from the appellant viz. ailment of her husband (blood cancer) and the training of her daughter as an Air Hostess, she could have adduced some evidence in order to bolster the said aspect, which she did not. Respondent No. 1 also could have relied on the presumption of fact, for instance, those mentioned in section 114 of the Indian Evidence Act to rebut the presumptions under section 118 and 139 of the N.I. Act. The statutory notice, complaint and evidence of the respective parties, if juxtaposed, would unerringly point out the fact that the respondent No. 1 did borrow an amount of Rs. 3,00,000/- from the appellant and issued cheques in question in discharge of a debt. Defences as raised by respondent No. 1 are unacceptable and unbelievable. Respondent No. 1 had failed to discharge the said onus. A bare look at Section 269-SS of the Income Tax Act would reveal that the said bar is applicable to a person who accepts deposit by way of cash and not to a person who makes or offers any money to the payee and, therefore, even if the said bar is made applicable to the present case, the same shall apply to respondent No. 1 who had accepted the amount of Rs. 3,00,000/- from the appellant by way of cash for which punishment is contemplated under Section 271 of the Income Tax Act - It is thus clear that no person should accept any loan or deposit of a sum of Rs. 20,000/- or more otherwise than by an account payee cheque or account payee bank draft. The provision does not say that a person cannot advance more than Rs. 20,000/in cash to another person. Restriction on cash advances was, in fact, on the taker and not on the person who makes an advance. The penalty for taking such advance or deposit in contravention of provisions of Section 269-SS was to be suffered by the taker who accepts the advance. The learned Magistrate had rendered the judgment in most cryptic and perfunctory manner, in the sense, neither the facts have been clearly stated nor the evidence has been properly discussed. The learned Magistrate has also misinterpreted and misread the legal position as envisaged not only under sections 138 and 139 of the N.I. Act but also the provisions of Section 269-SS of the Income Tax Act. The learned Magistrate has failed to appreciate vital admissions in the cross-examination of the appellant as well as D.W.2 Moulik Shah in it s correct perspective which have been elicited at the time of recording evidence - the findings arrived at by the Court below are patently illegal and perverse and, therefore, need to be set aside. Appeal allowed.
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